Which statement is TRUE regarding a purchase money mortgage?

A purchase money mortgage is a specific type of loan used to finance the purchase of real estate, typically when the buyer borrows money from the seller rather than a traditional lender like a bank. The true statement regarding a purchase money mortgage is that the seller finances a portion and places a junior lien on the property. This structure allows the seller to extend credit to the buyer, who can then make a lower down payment or finance the purchase more flexibly.

In many situations, the seller may agree to take back a loan or mortgage for part of the purchase price, which is secured as a junior lien. This means that if the buyer fails to make payments, the seller can claim the property, but they would be subordinate to the primary mortgage, usually held by a bank or other institution. This option can be advantageous for both parties; the buyer may secure better terms or be able to purchase without needing a substantial down payment, while the seller may attract more potential buyers.

The incorrect options point to misunderstandings about how purchase money mortgages operate. For example, it is not necessarily true that the buyer finances the entire purchase price, as this would negate the role of the seller as a lender in this scenario. Additionally, the requirement for a lender to be a