financing
Purchase Money Mortgage
A mortgage given by the buyer back to the seller as part of the purchase price, used as a seller-financing alternative to a contract for deed.
In depth
With a purchase money mortgage, title transfers to the buyer at closing and the buyer signs a promissory note and mortgage in favor of the seller. Unlike a contract for deed, the buyer is the legal owner from day one, and the seller's remedy on default is foreclosure rather than forfeiture. Misconception: a purchase money mortgage is not the same as bank financing; it is private seller financing recorded as a true mortgage. Practically, this structure favors buyers because they get clean title and standard foreclosure protections, while sellers prefer it in states where forfeiture is unavailable or hostile to sellers. Many states grant purchase money mortgages super-priority over other liens recorded the same day. Always record promptly to perfect the seller's lien.
Educational content only. Definitions reflect typical usage in US owner-finance and FSBO transactions; statutes and case law vary by state. Consult a licensed real-estate attorney for fact-specific guidance.