What is a purchase money mortgage?

A purchase money mortgage is defined as a mortgage loan that is created at the same time the property is transferred from the seller to the buyer. This type of mortgage is specifically designed to facilitate the financing of the home purchase, where the seller may provide financing directly to the buyer or the buyer may arrange a loan through a lender that allows the purchase to occur simultaneously with the ownership transfer. This arrangement often helps buyers who may have difficulty obtaining traditional financing or who want to negotiate terms directly with the seller.

In contrast, the other choices are not representative of what a purchase money mortgage entails. A lease agreement would not involve ownership transfer or a mortgage; a loan strictly for investment properties specifies a limited type of borrowing that doesn't encompass all purchase scenarios; and a mortgage not exceeding the home’s value pertains to general lending rules rather than the specific transaction context of a purchase money mortgage.