What is a type of seller financing where a buyer gives a mortgage to the seller to cover part of the purchase price?

A purchase money mortgage is a specific type of seller financing arrangement where the buyer borrows money from the seller to help cover the cost of the property. In this scenario, the buyer receives a mortgage directly from the seller, which is a crucial aspect of the transaction. This arrangement can allow for the buyer to acquire the property even if they might not qualify for traditional financing from a bank, making it an appealing option for both parties.

In this type of financing, the terms of the loan—including interest rate, payment schedule, and any conditions—are negotiated directly between the seller and the buyer, providing flexibility that can be beneficial in various real estate markets. It is specifically designed to facilitate the sale by reducing the immediate financial burden on the buyer. The seller essentially acts as a lender, allowing them to sell the property in a way that might otherwise not be possible if the buyer had to rely solely on conventional financing.

Understanding this financing method is important for real estate professionals, as it demonstrates the variety of ways to finance a home purchase and can help facilitate transactions in circumstances where traditional financing may not be achievable.