What defines a Purchase Money Mortgage?

A Purchase Money Mortgage is specifically defined as a mortgage given by the seller to the buyer as part of the transaction to facilitate the purchase of real estate. This type of financing is often used when the buyer may have trouble securing a loan from traditional lenders or when the seller wants to make the property more appealing to potential buyers by offering flexible financing options.

In this scenario, the seller acts as the lender, often allowing the buyer to make payments directly to them. This arrangement can benefit both parties by enabling the buyer to purchase a home even if they cannot secure conventional financing, and it can provide the seller with a steady stream of income from interest on the loan.

Other options do not align with this definition. A loan obtained from a bank specifically refers to conventional or traditional financing rather than an arrangement directly involving the seller. A mortgage from a third-party lender describes typical financing scenarios but does not capture the specific seller-to-buyer nature of a Purchase Money Mortgage. Likewise, a mortgage with no down payment does not inherently define the relationship between a buyer and seller in this context and could apply to various types of loans regardless of the source.