A borrower inherited a property with no existing mortgage and wants to obtain a mortgage against it for $200,000 to invest in other real estate. The property is worth $500,000. How should this transaction be classified?
Correct Answer
A) Purchase transaction because they're obtaining their first mortgage on the property
This is classified as a purchase transaction under TRID regulations because there is no existing mortgage to refinance. When a borrower obtains a first mortgage on a property they already own free and clear, it's treated as a purchase transaction for regulatory purposes, regardless of the intended use of proceeds.
Why This Is the Correct Answer
This is classified as a purchase transaction under TRID regulations because there is no existing mortgage to refinance. When a borrower obtains a first mortgage on a property they already own free and clear, it's treated as a purchase transaction for regulatory purposes, regardless of the intended use of proceeds.
More Mortgage Knowledge Questions
A borrower is comparing two loan offers: Loan A has no points and 4.5% interest rate, Loan B has 2 points and 4.0% interest rate. The loan amount is $400,000. How much will the borrower pay upfront for the points on Loan B?
A lender charges a 1% origination fee on all loans. For a borrower obtaining a $250,000 mortgage, what is the maximum origination fee that can be charged without violating the points and fees test under the ATR/QM rule for a first-lien mortgage?
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A borrower asks about the difference between discount points and origination fees. What is the most accurate explanation?
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