You’ll only need to worry about this if the home you’re purchasing is in an area that is prone to flooding. We’re not just talking about houses on the water, here. In fact, some waterfront houses aren’t in flood hazard zones! Here are two examples that could place your new house in a flood hazard zone:
- A creek runs behind your home, and it floods during heavy rains or spring thaws.
- Your home – or one nearby – has a drainage area that could cause flooding for surrounding homes.
Flood areas throughout the country are managed and determined by the Federal Emergency Management Association, or FEMA. You probably know FEMA as the government agency that comes out to help citizens following flooding or other severe weather.
FEMA also sends representatives out annually to determine which areas of the country are in flood zones and what the flood hazard level is. Your home could be in an area that is not prone to flooding, or it could be in an area susceptible to 500-year flooding or 100-year flooding, for example. The different levels of flooding affect the requirements for your specific flood insurance.
Why does this matter to you when you go to closing? It goes back to your lender and the risk they are taking by loaning you the large sum of money you need to buy your house. The lender always wants to make sure the loan is secure, so they want you to have insurance that will protect the property if the home ever floods and gets damaged severely. Remember, if you fail to make payments on your house, it becomes the bank’s property. The lender will require you to carry flood insurance to cover any potential for loss because of a flood. How much your flood insurance will cost depends on the property and the flood zone in which it is located.