Will a loan for purchasing a four-unit apartment building for personal living and renting fall under Regulation Z?

The correct answer is based on the classification of the loan under Regulation Z as it relates to the intended use of the property. When purchasing a four-unit apartment building, the primary consideration is whether the loan is for personal or business purposes. Regulation Z focuses on consumer credit and generally does not cover loans that are deemed business-purpose loans. In this scenario, even if one of the units is intended for personal living, the fact that the borrower plans to rent out other units indicates a business intent.

In Regulation Z, a loan is considered for personal, family, or household purposes when the proceeds are used for those specific needs. However, when a property purchase involves generating income through renting, it transforms the transaction into a business-related activity. This classification is critical in determining whether specific consumer protections apply under Regulation Z.

Thus, the reasoning behind why this loan is deemed a business-purpose loan is because the borrower’s intent to engage in rental activities shapes the purpose of the loan beyond personal use. Therefore, the loan does not fall under the protections of Regulation Z, which is designed to safeguard consumer transactions.