Finance
What is 'mortgage subordination' and why might a lender agree to it in Idaho?
AMaking a mortgage payment on behalf of the borrower
BA lender's agreement to lower the priority of their lien to allow a new senior lien to be placed on the property, often needed for refinancing✓ Correct
CReducing the mortgage balance
DThe borrower's subordination of other debts
Explanation
Mortgage subordination occurs when a lienholder agrees to accept a lower priority position to allow a new lien to be placed ahead of them. A second mortgage holder might subordinate to allow a new first mortgage refinance while keeping their lien in place.
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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.
LienA financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
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