Purchase Money Mortgages & Lien Priority

A purchase money mortgage is a mortgage given as part of the transaction that creates the buyer's ownership interest in the property. The most common example: the buyer borrows from a bank to buy a home, and the bank takes a mortgage on the property being purchased. Seller financing, where the seller takes back a mortgage from the buyer as part of the purchase price, is also a purchase money mortgage.

Why This Matters: Automatic First Lien Priority

Under 42 Pa.C.S. § 8141 and Pennsylvania purchase-money-mortgage doctrine, a purchase money mortgage has automatic first-lien priority. It takes priority over all other liens, judgments, and encumbrances against the buyer, even those that were recorded before the purchase. This is a major departure from the normal "first in time, first in right" recording rule.

Requirements

To qualify for purchase money priority, the mortgage must be part of the same transaction in which the buyer acquires title. The mortgage need not be recorded simultaneously with the deed, but timing matters. Under 42 Pa.C.S. § 8141(1), a purchase money mortgage takes priority from the time it is delivered to the mortgagee only if it is recorded within ten days after its date; if recorded later, its priority dates only from the time it is left for record. Recording within that ten-day window preserves the relation-back priority. One more trap for bank financing: under § 8141(1)(ii), a mortgage taken by a lender other than the seller is not treated as a purchase money mortgage unless the instrument expressly states that it is one, so that language belongs in the mortgage itself.

Seller Financing Considerations

When a seller takes back a purchase money mortgage (seller financing), the same priority rules apply: the seller's mortgage has automatic first-lien priority. This makes seller financing a relatively secure arrangement for the seller, provided the mortgage is properly documented and recorded. Key considerations for seller-financed transactions:

• The promissory note and mortgage must be properly drafted, not pulled from the internet
• A title search should still be conducted to identify any existing liens on the property
• The mortgage must be recorded with the Bucks County Recorder of Deeds
• The seller should require hazard insurance with the seller named as mortgagee
• Default provisions, acceleration clauses, and foreclosure rights must be clearly stated

I draft purchase money mortgages for both buyers and sellers and structure the transaction so both sides are protected.

Statutory content on this page was last verified against Pennsylvania statutes (20 Pa.C.S.; 72 P.S. Art. XXI): Jun. 2026. If you are reading this significantly after that date, confirm key provisions with current statute text or contact our office.