The Smiths' purchased a residence for $75,000. They made a down payment of $15,000 and agreed to assume the seller's existing mortgage, which had a current balance of $23,000. The Smiths' financed the remaining $37,000 of the purchase price by executing a second mortgage whereby the seller became a mortgagee. This type of loan is called a:
1- Wraparound mortgage
2- Package mortgage
3- Balloon note
4- Purchase money mortgage

The correct answer is 4

Explanation:

Purchase money mortgage is the kind of mortgage which is issued to the borrower through the seller of the home as a part of the transaction of the purchase. It is also referred or called as the owner financing, which is usually conducted where the buyer could not qualify for the mortgage.

Under this situation, the buyer financed the balance amount of the purchase price through executing the second mortgage where the seller become the mortgagee, so this is the kind of loan is known as the purchase money mortgage, which also referred to as the purchase money second, which is a steamlined and it is the most cost effective option of financing.

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