Qualifying For FEMA Flood Insurance

If you're contemplating the purchase of a new home, you should be aware that Federal Emergency Management Agency (FEMA) flood insurance is required in certain areas. If live in an area that has been determined to have a 1% or greater chance of significant flooding in any given year, Congress has passed legislation that requires that you purchase flood insurance when accepting a mortgage from any federally insured or regulated bank or lender. For the most part, this covers almost any private home mortgage that is applied for as almost all banks and home loan lenders are regulated by the federal government in one way or another.

FEMA Flood Insurance Qualifications

In order to qualify for FEMA flood insurance, you simply need meet the qualifications set by home loan lender to be approved for a loan. Once you're approved for your home loan, and you live in an area that requires FEMA flood insurance, your lender will require you to purchase flood insurance coverage - before the loan is closed. Furthermore, if you fail to provide proof of flood insurance coverage, the lender may choose to cancel the loan or may force coverage upon you by purchasing the policy from an insurer and then adding the amount of the policy to your required escrow funding or simply add it to your loan and make it part of your monthly mortgage payment.

FEMA Flood Insurance Requirements

All homes or improved property purchased in Special Flood Hazard Areas, or SFHAs, must have flood insurance coverage, when their home is mortgage by a federally insured or regulated lender; in addition, lenders may charge an additional fee for determining whether your home is located as SFHA. However, if the bank decides to charge a fee for this service, they cannot charge a fee that is more than the actual cost of the services as it was provided to them. If the lender avails of any volume deals or discounts, these discounts must be passed on to you as the buyer.

You may be required to escrow flood insurance premiums along with taxes and insurance premiums or other fees and charges that require escrow. If your lender requires an escrow for taxes and premiums of other types of insurance, you will almost always be required to escrow funds for flood insurance as well. Normally these escrow funds are just added to your normal monthly mortgage payment.

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