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
B) 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 refinances their home with a cash-out refinance loan of $750,000. The original loan balance was $400,000, and they're taking $300,000 in cash. If conforming limits allow $766,550, how is this loan classified?
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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Under TRID regulations, discount points must be disclosed on the Loan Estimate in which section?
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