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Reviewed by Casa Academy and updated July 29, 2026 using the current DBPR checklist and Pearson VUE scheduling guidance.

Purchase Money Mortgage

A purchase money mortgage is a loan used to buy real property, typically recorded at closing as a first lien that secures the promissory note given to pay part or all of the purchase price, distinguishing buyer financing from later refinance or home equity debt.

Exam context

Purchase money mortgage finances property acquisition. Recorded at closing with note. Seller financing may be purchase money second. Refinance loan is not purchase money.

Creation at closing

The buyer signs a note and grants a mortgage to the lender providing acquisition funds. When the seller finances part of the price, the seller may hold a purchase money mortgage, often subordinate to a bank first lien. Title insurers and attorneys record the security instrument immediately after deed delivery to perfect lien priority.

Priority and later loans

Purchase money mortgages generally rank ahead of non-purchase money liens attached before acquisition under many state rules. Subsequent refinance replaces the original purchase money loan with a new note. Agents should clarify whether existing financing is purchase money when discussing assumption or subject-to offers.

Examples

  • Bank first lien

    A buyer borrows $300,000 from a credit union to purchase a home and grants a purchase money mortgage recorded the same day as the warranty deed.

  • Seller carryback

    The seller accepts $50,000 cash and carries a $40,000 purchase money second mortgage at 8% while the buyer's bank holds the first purchase money lien for $210,000.

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