The precedence of liens is according to their filing. The first lien is superior because it was filed first.
Some exceptions to this rule apply. Taxes are the most superior lien, even though they can be filed after a mortgage note. Even if you buy a home in foreclosure, the tax lien, if any, is superior and goes with the property. A homeowners' association has the next position after taxes. Their covenants are filed prior to sale of the property to the first homeowner, usually. However, the lien created by a HOA is often subordinated to what we call the first mortgage.
When you buy a house, the 80% or greater mortgage note is recorded first, making it the first lien. In order to assure its position as higher than the HOA's dues liens, the covenants normally contain a clause that places their lien behind the mortgage. In foreclosure the subordination clause wipes out the HOA lien when the first mortgage is foreclosed. A foreclosure does not wipe out tax liens.
It sounds like you are purchasing the home in a wrap transaction, where the last owner still has a mortgage payment to make, but you are paying her a little more to cover that mortgage payment plus some to cover the difference between the mortgage balance and what you bought it for.
There is some risk that she may fail to make the payment to her mortgage company. You should check with her to make sure she is keeping up with those payments.
The Seller Financing addendum refers to a superior lienholder and in this case means the old owner's mortgage company (the note that is being wrapped). Many people buying like you pay the actual mortgage payment in check form delivered to the old owner, who in turn pays it to the mortgage company, but they also include a separate check to the old owner each month for the remainder principal & interest in seller financing. In this way the old owner cannot cash the check and not pay the wrapped mortgage off, but both parties can verify that the old mortgage is being paid.
Most mortgages contain a Due on Sale clause that is the source of some risk to you. If the old mortgage company has such a clause in its mortgage note with the old owner, they can accelerate the note and require her to pay it off immediately if she transfers title to someone else (which it sounds like she has, to you). Most lenders will not invoke this clause so long as payments are made on time and no one rubs their noses in it. Calling the old mortgage company would be rubbing their noses in it. Any proof you want should be obtained directly from the old owner that she is paying properly.
If you have concerns, you should consult a real estate attorney.
We don't use the term inferior, but her note is subordinate to the superior note held by the old mortgage company. Mechanics liens from people who work on the property or other notes that you might have caused are after her note -- so they are even more "inferior". Just remember taxes are always superior liens, and her old mortgage note is superior to your note with her.