FinanceIntermediateColorado Exam

A 'purchase money mortgage' in Colorado is one where:

AThe buyer uses cash only and avoids a mortgage

BThe seller provides financing to the buyer as part of the purchase transactionCorrect

CThe lender contributes to the buyer's down payment

DThe mortgage is used to purchase investment property only, under standard practice

Why The seller provides financing to the buyer as part of the purchase transaction Is Correct

Answer B: The seller provides financing to the buyer as part of the purchase transaction

A purchase money mortgage (PMM) is seller financing where the seller provides all or part of the financing to the buyer, taking back a mortgage or deed of trust. Also called seller carryback financing.

Exam Tip: Finance

Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.

Key Finance Terms in This Question

Deed of Trust

A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.

Deed

A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).

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Key Terms to Know

Deed of Trust

A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.

Deed

A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).

Private Mortgage Insurance (PMI)

Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.

Loan-to-Value Ratio (LTV)

The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.