Flood Insurance Mortgage Guidelines With Homes In Flood Zones

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This ARTICLE On Flood Insurance Mortgage Guidelines With Homes In Flood Zones Was PUBLISHED On February 12th, 2020

What are the guidelines for mortgage flood insurance with homes in flood zones

Flood insurance can be incredibly expensive and may even deter you from buying a specific property.

  • In this blog, we will detail when flood insurance is required for mortgage lending, the basics surrounding mortgage insurance, and some tips to keep your investment protected
  • Flood insurance is required in specific areas of our country
  • Most people do not know this, but floods are the most common natural disaster in the United States
  • Floods happened in areas all throughout the country, not just by waterways and oceans
  • Floods can be caused by hurricanes, heavy rains, flash flooding, and even from issues in the sewers
  • Flooding has been recorded for hundreds of years in our country
  • This has helped create the HUNDRED YEAR FLOODPLAIN map
  • The Federal Emergency Management Agency or FEMA has an interactive map available here
  • You may check if your property is located in a flood zone or not

In this article, we will discuss and cover Flood Insurance Mortgage Guidelines With Homes In Flood Zones.

Dangers Of Flood Damaging Homes

Each year it is estimated that floods will drive about 75,000 Americans out of their homes and an average of 127 people die a year from flooding in the United States. Flights have caused billions of dollars in damage in a single year. It is documented between the years 1985 and 2001, there were a total of over 32,000 flooding events in the United States alone.

Difference Between Flood Versus Homeowners Insurance

It is important to understand the differences between the homeowner’s insurance and flood insurance. Homeowners insurance is required for any home with mortgage financing. This will cover the home for the majority of damages but will not cover flooding/damage caused by a flood. You must have a separate flood policy for this destruction to be covered.

Flood Insurance Mortgage Guidelines With Property In Flood Zones

What are the mortgage guidelines for flood insurance with real estate in flood zones

What do you do if the property you are located and is in a flood zone?

Click here to check if your property is in a flood zone: FEMA FLOOD MAP

The first thing you’re going to need to do is shop around for flood insurance. Flood insurance can be a major expense and will be factored into your debt to income ratio. In the past, we have seen borrowers not apply for a house in a flood zone because the housing payment becomes too high with the added flood insurance. It is important to ask your realtor if a property is located in the flood zone. Even if you are right on the verge, there is a chance it will be part of a flood zone in the future and eventually you will need mandatory flood insurance. If you are in an area with heavy flooding, flood insurance could save you thousands of dollars in the long run. It is a protection on your real estate investment.

National Flood Zone Areas

There are numerous different flood zones on the map provided by FEMA. These zones include zones A, AE, A1-30, AH, AO, V, VE, V1-30, B, C, X, shaded X, AR, and A99.

Zone A, AE, A1-30, AH, AO, V, VE, V1-30- These areas are the highest risk areas. These are known as Special Flood Hazard Areas (SFHAs). Flood insurance is mandatory for any structure with a mortgage from a federally regulated or insured provider. Even if you do not have a mortgage, FEMA strongly suggests keeping your flood insurance policy in these areas.

Zone B, C, X, shaded X – still has the potential for flooding. This zone is considered moderate to low risk. Flood insurance is not federally required but recommended. Depending on your lender, the lender may require flood insurance.

Zone AR – this zone represents an area where a Levi is determined to no longer provide flood protection. The levee will be in process of being restored but until it is complete, flood insurance is mandatory for any structure with the mortgage. Flood insurance must be fed you early regulated or from an insured lender. Flood insurance rates are the same as zones B, C, and X.

Zone A99 – Same information as Zone AR but the levee is a Federal levee under construction. Zone AR refers to a NON-Federal levee.

Flood Insurance Mortgage Guidelines And Types Of Coverages

Flood insurance has different levels of coverage. Even if you are not in the flood zone, you may still want to have flood insurance. Some flood insurance policies will only cover the structure of your property but not your personal belongings. It is important to understand the difference and have an educated conversation with your flood insurance agent. Nothing is worse than your home being destroyed by a flood and insurance will not replace personal items, furniture, or appliances. This can leave you in a deep financial hole. If you are in a flood zone, talk to your insurance agent about ways to lower your insurance premiums. We have heard stories of elevating your furnace and air-conditioning units or even raising your entire home on stilts to lower your flood insurance premium cost. It is also important to manage your flood insurance policy after your mortgage is paid off. Once your mortgage is paid off, you are no longer required to have flood insurance, but it is a good idea to keep the coverage. In the past few years, hurricane seasons have been very strong. The storm surge has caused flooding areas hundreds of miles north of the coast. All things to keep in mind if you have traditional homeowners’ insurance and not carrying an additional flood policy.

High Cost Of Insurance

What is the high cost of insurance?

Insurance always seems like an unnecessary cost until you need to use it. I personally know the devastation flooding can cost from speaking with clients in the past. A flood can happen to anybody at any time. Many environmental experts predict flooding will become worse in the future due to our changing climate. The Gustan Cho Associates at loans Cabin are here to provide you information and advice to purchase the home of your dreams. However, we are not licensed insurance agents. We have working relationships with many insurance agents across the nation and we can help direct your questions to them. For more information on flood insurance, please call Mike Gracz on 630-659-7644.

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