That second mortgage from the seller usually comes with a higher rate, a shorter term and a potential balloon payment. Or, the seller can hold the entire mortgage and the buyer makes payments directly to the seller. Reduces the cash needed to get into a home and could reduce closing costs. There are two monthly mortgages payments and the seller determines the interest rate for the second loan. Seller owns home during the lease period.
Buyer makes payments to escrow agent, who holds the deed to the property.
After 180 months or some other term of payments to the escrow agent, seller tells escrow agent that payments have been made and escrow agent gives buyer the deed. Bank never gets involved. Reduces closing costs. Buyers who default before they fully own their properties can be treated like tenants and evicted. These unconventional purchase methods, while potentially more rewarding than renting, can be risky.