We have a borrower taking equity out of his home, to give the funds to the daughter to purchase a dwelling.......is this a purchase? Or is it an "other" because our borrower is not the one making the purchase.

"to give the funds to the daughter"

That is the purpose in my mind. What the daughter does with the funds is not relevant.

But if the borrower states that she is using the funds for a purchase, does that make it a purchase? I've always heard "follow the money" in trainings, so I was not certain.

If the borrower tells you they are going to buy a house, I would agree, But the borrower is giving the money to a third party. That third party could be going to Disneyland for all that you really know. But it is your call. Just one person's opinion.

I think that would depend how they stated the purpose:

"The money is to give to my kid to purchase a home" - no, in this case I agree with Randy. The purpose for the borrower is to give gift funds to their kid.

"The money is to purchase a home" - then the regulation does allow you to rely on the applicant's/borrower's stated purpose. However I would advise reporting the true purpose of the loan.

Ok, thank you both. I had a hard time deciding on this one.