What is a Purchase Money Mortgage?

A Purchase Money Mortgage refers specifically to a type of loan in which the seller provides financing to the buyer to facilitate the purchase of real estate. This arrangement typically occurs when a buyer may have difficulty securing a loan from traditional financial institutions. In this situation, the seller agrees to lend a portion or the entirety of the purchase price, thereby allowing the buyer to make the purchase directly without needing a third-party lender. This method can facilitate the sale, providing benefits such as quicker closings and potentially more flexible terms for both parties.

The other options do not accurately define a Purchase Money Mortgage. A loan for purchasing investment properties pertains to financing used for buying properties intended for investment purposes, rather than a loan specifically from a seller to a buyer. The term “mortgage with a low interest rate” does not inherently describe the nature of a Purchase Money Mortgage, as the interest rates can vary widely. Similarly, a government-backed loan refers to loans that are supported or insured by government entities, which does not specifically apply to the seller-provided financing that characterizes a Purchase Money Mortgage.