What is a mortgage loan obtained for purchasing residential property called?

What is a mortgage loan obtained for purchasing residential property called?

• A. Construction Loan
• B. Buying Loan
• C. Purchase Money Mortgage
• D. Home Equity Loan

Answer: (C)

A mortgage loan obtained specifically for purchasing residential property is called a Purchase Money Mortgage. This type of mortgage is distinct because it is primarily created to facilitate the acquisition of the property itself, rather than for any other purpose such as renovation or leveraging existing equity. When a buyer takes out a Purchase Money Mortgage, the funds provided by the lender are directly used to pay the seller for the property, enabling the buyer to acquire ownership. This arrangement directly ties the loan to the purchase, and the property itself serves as collateral for the loan. In contrast, a Construction Loan is typically used to finance the building of a new home rather than the purchase of an existing one. A Home Equity Loan involves borrowing against the existing equity in a property that the borrower already owns, rather than financing a new purchase. The term "Buying Loan" does not correspond to any recognized category of mortgage loan and could lead to confusion. Therefore, the choice of Purchase Money Mortgage accurately reflects the specific intent of this type of financing.

A mortgage loan obtained specifically for purchasing residential property is called a Purchase Money Mortgage. This type of mortgage is distinct because it is primarily created to facilitate the acquisition of the property itself, rather than for any other purpose such as renovation or leveraging existing equity.

When a buyer takes out a Purchase Money Mortgage, the funds provided by the lender are directly used to pay the seller for the property, enabling the buyer to acquire ownership. This arrangement directly ties the loan to the purchase, and the property itself serves as collateral for the loan.

In contrast, a Construction Loan is typically used to finance the building of a new home rather than the purchase of an existing one. A Home Equity Loan involves borrowing against the existing equity in a property that the borrower already owns, rather than financing a new purchase. The term "Buying Loan" does not correspond to any recognized category of mortgage loan and could lead to confusion. Therefore, the choice of Purchase Money Mortgage accurately reflects the specific intent of this type of financing.