What is a Purchase Money Mortgage?

A purchase-money mortgage is a mortgage issued to the borrower by the seller of a home as part of the purchase transaction. It is also known as Seller financing. It functions the same as a mortgage obtained through any lending institution. This type of mortgage is also used in situations where the buyer is assuming the seller’s mortgage and the difference between the balance on the assumed mortgage and the sales price. As a result of this non-traditional loan, these types of mortgages typically have higher payments as well as interest rates.

How does it work?

  1. First, the property and its title must be clear.
  2. Once the seller has a clear title, the buyer and seller agree on an interest rate, monthly payment, and loan term. The buyer pays the seller for the seller’s equity on an installment basis.
  3. We can help prepare the security instrument for this purchase money and connect you with sellers who make these properties available to the real estate marketplace.

Who should consider one?

  • Individuals who don’t qualify through a traditional lender channel may benefit from a Purchase Money Mortgage.
  • Borrowers who are assuming the rest of the seller’s mortgage.

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