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When the seller provides the financing for the buyer to cover all or part of the sale price, the arrangement is a purchase money mortgage. In this setup, the buyer signs a promissory note and the seller takes a mortgage on the property, receiving regular payments just like a lender. The property serves as security, and the seller holds the lien until the loan is paid in full. This is a classic form of owner financing, straightforwardly tying the loan to the sale price.

This differs from a wraparound mortgage, which adds a new loan that “wraps” around an existing mortgage the seller already holds, rather than a simple new loan from the seller to the buyer. A second mortgage is a separate lien that sits behind the primary loan, often from a different lender. A construction mortgage is used to finance building the property, not to purchase an already completed home.