Explore the Mortgage101 Library
Check Local Mortgage Rates
Loan Program Choices
Use our calculator to find out your estimated monthly payment in advance: Enter the loan amount, interest rate, and length of mortgage.
Try our Mortgage Payment Calculator
A purchase-money mortgage is a type of seller financing often used when a borrower cannot qualify for a traditional mortgage loan. The seller of the property, instead of a bank or other mortgage lending institution, becomes the mortgage holder. The interest rate for purchase-money mortgages will often be higher than a conventional loan rate due to the risk incurred by the seller for carrying the financing.
If you are unable to obtain a loan approval for a home you want to buy, the seller may offer to finance your purchase in order to complete the sale. This is risky for the seller, because she will not receive the entire purchase amount for the house at the time of the sale. There is no risk to you, because you are the legal owner of the home.
Some sellers will use a purchase-money mortgage as a long-term investment. If the mortgage is paid as agreed, the seller makes money from the finance charges. This nets her a total amount greater than she would have received by getting the full amount of the purchase at the time of the sale.
- Low Down Payment Loan Qualification
- What To Do When Mortgages Default
- 3 Reasons Banks Reject Short Sales
- 3 Common Short Sale Mistakes
- FHA Loans for a First-Time Home Buyer
- Appraisal Basics
- How to Get Approved for an FHA Loan despite Bad Credit
- Should You Refinance? Make Sure the Timing is Right
- Alternatives to Getting a 2nd Mortgage