VE Flood zone for cheap

The Ultimate Guide to Lender-Required Flood Insurance

If you have a loan on your property, then your lender pulled a report called a Flood Zone Determination (FZD). This document will tell the loan compliance department if you will need to purchase flood insurance for the home.

It may seem as if your real estate agent or mortgage lender is withholding that flood insurance is required until the property is ready for escrow. The FZD usually isn’t requested by the loan department until your purchase is well underway. Most realtors and Mortgage brokers are as surprised as you when the report comes back positive. 

The flood nerds will demystify flood insurance and why you will need to buy it for your loan. 

  • Loans requiring flood insurance are federally backed money for properties located in higher-risk flood zone maps. 
  • Flood Insurance is a separate policy from your homeowners, which typically excludes coverage for damage caused by floods. 
  • Lenders usually will only require flood coverage on the structure; however, if you want coverage for your items, you can add that to the policy. 
  • There are two types of flood insurance, the government option, also called NFIP or FEMA, and the private flood insurance markets. 

Why am I required to buy flood insurance?

If you review the exclusions section on your homeowner’s policies, you will see that flooding is not covered. A flood will include natural disasters or human-made ones like a dam break. 

A separate insurance policy that will cover flooding is the only way to protect against invasive water. 

For homes that are in a flood zone map that is considered a lower risk, the purchase of flood insurance is optional.

If your lender requires you to purchase a flood insurance policy, the structure is in a high-risk flood zone. 

Federal law necessitates that a lender or servicer to escrow all insurance premiums, taxes, and fees. For properties in a high-risk flood zone, a loan will not close until there is evidence of flood insurance. 

When you take out a mortgage to purchase a property, the structure serves as collateral.

Since the lender has a more significant financial state in the property, if you were to stop making the mortgage payment, the lender is caught in a losing position. All lenders require taxes and insurances (including flood insurance) into your monthly mortgage payment through an escrow account to eliminate this risk. 

If damage by floodwaters, which could cost thousands for uninsured the borrower could abandon the home or stop making payments, the lender is left with damaged property. 

Flood insurance will provide money to fix or even rebuild the structure if damaged or destroyed by flooding.

When a claim is made, the homeowner will only have to pay the deductible, and as a result, we are more likely to keep making our mortgage payments, keeping the lender happy. 

How do I find out if I need to buy flood insurance? 

All properties are at risk of flooding regardless of being required to purchase it or not. Anywhere it rains, it can flood. Just a few inches of water can cause tens of thousands of dollars in damage. 

Use this link to discover if your building is in a higher risk flood zone. This will help you be more prepared when your lender requires flood insurance. The final decision will come from the official flood zone hazard determination (FZD) that your lender will request from a service provider.

It may be difficult to read the map in some areas if this is the case, let us know, and we can run an FZD for you. 

Just fill our intake and in the notes, ask for us to send your the FZD.