What is a purchase money mortgage (PMM)?

A purchase money mortgage (PMM) is specifically defined as a note secured by a mortgage from the buyer to the seller. This type of mortgage is used when the buyer borrows money from the seller to help finance the purchase of the property, with the property itself serving as collateral for the loan. This arrangement can be beneficial in transactions where a buyer may not easily qualify for a traditional mortgage or when sellers are willing to provide financing to facilitate the sale.

In this scenario, the PMM is directly tied to the purchase transaction, distinguishing it from other types of loans. It reflects a direct financial relationship between the buyer and the seller, focusing on the dynamics of real estate financing during the home buying process.

While the other choices mention relevant concepts within real estate transactions, they do not correctly define a purchase money mortgage. For instance, a loan secured by a property seller might be true in some contexts but lacks the specific nature of a PMM, which involves the mortgage being taken out specifically for the property being purchased. Similarly, mentioning a mortgage taken out on a secondary property might hint at investment properties, but it strays from the core definition of PMM as it pertains to the primary purchase at hand. Additionally, a loan with no collateral,