Escrow & Title
What is a 'subordination clause' in a North Dakota mortgage?
AA clause requiring the borrower to maintain insurance
BA clause allowing a later mortgage to take priority over an existing earlier mortgage✓ Correct
CA clause preventing the property from being sold
DA clause requiring the lender to subordinate to the buyer's insurance
Explanation
A subordination clause allows an existing senior lienholder to voluntarily agree that a new lien (such as a construction loan) will take priority over the existing lien, changing the normal priority order based on recording dates.
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Key Terms to Know
Lien
A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
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.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
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