Finance
In Tennessee, a 'purchase money mortgage' is one that:
AIs insured by the FHA
BIs provided by the seller to help finance the purchase of the property✓ Correct
CRequires private mortgage insurance
DIs originated by a commercial bank only
Explanation
A purchase money mortgage is seller financing — the seller extends credit to the buyer as part of the purchase transaction. It is used when the buyer cannot obtain full conventional financing.
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Key Terms to Know
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.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
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