What To Know About Buying in a Flood Zone

There are certain places in the country that are at significant risk for flood damage. For example, if you live along the Gulf Coast, you’re at risk of things like tropical storms and hurricane surges. 

That’s when flood insurance in Mississippi, Florida, and similar states becomes necessary. 

However, it’s not just coastal areas where you have to worry about rising water and its effects on your home. Floods can happen in a lot of diverse areas.  

The following are things everyone should know about buying in a flood zone specifically. 

What is a Flood Zone?

Any area can be prone to flooding, but some places are more likely to flood than others. Your property can be a low, moderate, or high-risk level, and based on that, you might have to deal with the threat of damage and also higher insurance premiums. 

You can check the website of the Federal Emergency Management Agency (FEMA) website to find flood maps. These maps on the FEMA site will give you a risk calculation based on flood patterns and previous events. 

FEMA says there’s no place that’s considered a no-risk zone, but you can find out how prone your property might be to flooding with the maps. 

If you are thinking about buying in an area with a 1% or higher chance of flooding, that’s considered high-risk. 

The 1% flood risk chance is also known as the base flood or 100-year flood. This is a way of saying that during a typical 30-year mortgage, these areas have a one-in-four chance of experiencing flooding, at least. 

FEMA has two types of flood areas. There are Special Flood Hazard Areas or SFHAs and Non-Special Flood Hazard Areas or NSFHA. 

Special Flood Hazard Areas are zones starting with the letters A or V. There’s at least a one-in-four chance of a flood during a 30-year mortgage period, and the National Flood Insurance Program’s floodplain management regulations have to be enforced. 

If you’re in one of these areas, you’re required to have flood insurance. 

Non-Special Flood Hazard Areas are designated as zones B, C, and X Pre- and Post-FIRM. They’re low-to-moderate risk flood zones. 

If you’re in this area, FEMA doesn’t designate you as being in immediate danger from flooding due to hard rains or bodies of water that overflow. However, FEMA says that even though they’re a low-to-moderate risk, one in four flood claims actually come from these areas. 

Just because you buy in an area that’s low-risk at the time doesn’t mean it will stay that way. Classifications can change, and your home can go from low- to high-risk. It’s something to check on from time to time to make sure you’re protecting yourself. 

Required Flood Insurance

If you use a mortgage backed by the government, which includes an FHA, VA, or USDA loan, for a property that’s located in a high-risk flood zone, you have to get flood insurance. 

If you buy outside of a high-risk zone, your lender could still decide to require flood insurance for you to get a mortgage, despite it not being federally required. If you get a conforming loan and you’re in an area designated A or V, you’ll need coverage, but if you get a non-conforming loan, it may not be required, although it’s still highly recommended. 

What to Consider Before You Buy in a Flood Zone

If you’re thinking about a home in an area that’s especially prone to flooding, there are some extra things you need to think about. 

First, you need to understand your risk, as highlighted above. There are things you can do even if you buy in an A or V zone, like getting a sump pump and making sure you have adequate insurance protection. 

You will also need to have a thorough understanding of the costs of flood insurance. For example, buying in A and V zones is going to mean your flood insurance will be more expensive than if you were in a lower-risk zone. 

On average, flood insurance is around $700 a year, but if you’re in a high-risk area, you could pay more than $1,000 annually. 

Your mortgage company, if you’re in a high-risk area, might require you to pay up to a year of flood insurance upfront, and that would be due on closing. 

If you want to buy in a flood zone, you have to think about what it could be like when you want to sell. It’s not always easy to sell a home in a flood zone. 

You’ll need to disclose everything to a buyer and be forthcoming, and you may have to price your home accordingly based on your flood zone. 

If you’re buying rather than selling, the advantage of buying in a flood zone is that you may get a lower price for a home compared to one that’s similar but not in one of these areas. You just have to remember to think long-term about resale. 

Getting a Mortgage 

If you’re applying for a conventional mortgage from a private lender, or you’re in a non-SFHA loan, your lender probably isn’t going to require flood insurance but think about whether it could be a smart move regardless. 

If you get flood insurance regardless of your zone, then you should be able to apply for any conventional or government-backed loan. 

The National Flood Insurance Program (NFIP) is administered by FEMA, and it provides most of the residential coverage for flooding in the U.S., but it’s not available everywhere. If you’re somewhere where NFIP protection isn’t available, you can buy flood coverage from a private insurance company. 

Finally, if you are going to buy in a flood zone or you’re interested in a home in one, you should have a thorough inspection done. This will let you know if there are any red flags to be aware of, like previous flood damage or signs of existing damage. 

Some states have requirements for homeowners’ disclosures, which may include details on whether the home has gone through flood damage. If this isn’t required to be disclosed, a professional inspection is helpful.