---
title: HMDA Loan Purpose
description: Learn how to correctly report HMDA loan purposes, including home purchase, refinancing, home improvement, and other consumer purposes. Understand the reporting hierarchy to avoid confusion.
---

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# [HMDA Loan Purpose](https://blog.bankerscompliance.com/en/hmda-loan-purpose)

 Written by [David Dickinson](https://blog.bankerscompliance.com/en/author/david-dickinson) | Mar 12, 2024 6:22:59 PM

The HMDA rules require a financial institution to report dwelling-secured applications for the purpose of purchasing a dwelling, refinancing a dwelling, improving a dwelling or for other consumer purposes (home equity). When you have an application that has multiple purposes; however, it can cause confusion. [HMDA](https://www.consumerfinance.gov/data-research/hmda/) uses a reporting hierarchy, and it is NOT based on majority wins. Here’s a little more explanation:

- > Home Purchase

> A loan *…that is a home purchase loan… may also be a home improvement loan… and a refinancing… if the transaction is a cash-out refinancing and the funds will be used to purchase and improve a dwelling. *[Commentary to §1003.2(j) #6]* *Report the loan as a home purchase loan. [Commentary to §1003.4(a)(3) #3]
> 
> - Refinance
> 
> *If a covered loan is a home improvement loan as well as a refinancing or cash-out refinancing, but the covered loan is not a home purchase loan, an institution complies… by reporting the covered loan as a refinancing or a cash-out refinancing, as appropriate.* [Commentary to §1003.4(a)(3) #3]
> 
> - Home Improvement
> 
> *If a covered loan is* *a home improvement loan as well as for another purpose, but the covered loan is not a home purchase loan, a refinancing, or cash-out refinancing, an institution complies… by reporting the covered loan as a home improvement loan. *[Commentary to §1003.4(a)(3) #3]
> 
> - Other
> 
> If a consumer-purpose loan or line is not for a home purchase, a refinance or home improvement, report the purpose as “Other” (aka consumer home equity).

So, for example, if you have a $15,000 loan where $5000 will be used to improve a dwelling and $10,000 will be used to pay off consumer credit card debt, you report the loan as a home improvement loan.

Published  
2024/03/14

 

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