Finding the perfect home can be difficult, but buying a home in a flood zone brings many other challenges. Before you take the plunge, it’s essential that you consider the costs and risks involved. If you’re considering purchasing a home in a flood zone, here are some important things that you need to know.
What is a flood zone?
A flood zone is an area of land that is determined to be at risk of flood, according to the Federal Emergency Management Agency (FEMA). FEMA uses several different designations to determine the risk of flood zones, from low to moderate risk areas and the high-risk regions.
There are also two categories that flood zone designations can fall into; Special Flood Hazard Areas (SFHAs) and Non-SFHAs. SFHA’s include areas that are designated letter “A” or “V.” This means that FEMA believes there’s at minimum a 1 in 4 chance of flooding during a standard 30-year mortgage. Non-SFHAs are moderate- to low-risk areas and are designated with the letters B, C, or X. According to FEMA, areas in these zones receive a third of federal disaster assistance because of flooding.
How do you find out if a house is in a flood zone?
If a real estate agent is listing the property, they’ll should forthcoming in helping you determine whether the home is in a designated flood zone. They will also be able to tell you which zone it is and what that means to you as a buyer. Alternatively, you can go to FEMA’s Flood Map Service Center and look up the property’s address.
Can I Get A Mortgage On A House In A Flood Zone?
Yes, however, there are specific terms that you must be aware of. For instance, if you have a federally-backed loan, such as a Fannie Mae, Freddie Mac, FHA, VA, or USDA, you must have flood insurance coverage if your property is located in an “A” or “V” flood zone.
If you’re applying for a conventional mortgage, or if your new home is in a non-SFHA zone, whether you require flood insurance will depend on your lender. Regardless of whether your lender requires you to take out flood insurance or not, it would be prudent to do so if your home is located in a flood zone. The National Flood Insurance Program (NFIP) provides flood insurance to most residential flood areas in the U.S.
What are the Advantages?
Properties in SFHA zones tend to be less expensive than homes not located in a flood zone. However, this is not always the case.
Although buying a home in a flood zone may seem counter-intuitive, many people’s dream homes are located in flood zones! Many waterfront or beachfront houses are located in low-lying coastal areas and designated as FEMA flood zones.
What are the Risks?
Potential disadvantages of buying a home in a high-risk flood zone include the following;
Increased Expenses: Flood insurance can be expensive. The premium you’ll pay will depend on your location and risk-level. You can expect to pay around $700 annually for the average cost of an NFIP policy. It’s important to note that flood insurance may not cover 100% of the costs associated with remediating flood damage or rebuilding your home should it flood. Even with ample insurance coverage, a flooding event is often extremely stressful and disruptive.
Evacuation: When living in certain flood zones, there is a possibility that you may need to evacuate your home immediately if a major disaster is imminent. In addition, you may not be able to return to your home until local law enforcement deems it safe.
Resale Value: A home flooded in the past may have a lower resale value than similar houses in the area. In fact, even if your home hasn’t experienced flood damage but is located in a high-risk flood zone, it could impact your sales price and take longer to sell.
What to Considering When Buying a Home In A Flood Zone
When purchasing a home in a flood zone, it’s crucial that you have a professional conduct a comprehensive home inspection. In particular, you should look for previous flood evidence and water damage, as this can indicate costly repairs. It’s also prudent to research the cost of flood insurance and factor it into your estimated homeowner expenses. Informing yourself as much as possible can help you to avoid making an expensive mistake in the longterm.