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How do Flood Insurance Maps affect USDA Loan eligibility in Florida, Texas, Tennessee, and Alabama?

February 10th, 2023 by Sean Stephens

What are USDA Loan flood insurance requirements? How do Flood Insurance Maps affect USDA Loan eligibility in Florida, Texas, Tennessee, and Alabama? These are great questions, because the topic of flood zones and USDA eligibility can create confusion during the process!How do Flood Insurance Maps affect USDA Loan eligibility in Florida, Texas, Tennessee, and Alabama?

We commonly deal with situations where USDA eligible properties may be affected by existing flood insurance maps  In today’s video, I will explain how flood insurance maps affect USDA loan eligibility in Florida, Texas, Tennessee, or Alabama , if additional structures require flood insurance, and the required flood insurance coverage amounts.

Now, if you have not yet done so, please download our FREE USDA Blueprint for Success. This free guide is designed to help walk you through the USDA process step-by-step, and is a great educational resource for both homebuyers and their Realtors alike.

Flood insurance maps are maintained by FEMA and are used to show how likely it is for an area to flood. They are also available to help understand areas with the highest risk of flooding. FEMA states the following regarding flood maps:How do Flood Insurance Maps affect USDA Loan eligibility in Florida, Texas, Tennessee, and Alabama?

“Flood maps help mortgage lenders determine insurance requirements and help communities develop strategies for reducing their risk. The mapping process helps you and your community understand your flood risk and make more informed decisions about how to reduce or manage your risk.”

USDA flood insurance requirements for properties located in a Special Flood Hazard Area (SFHA) are different for existing dwellings versus new or proposed construction properties.

In today’s post we will only be covering USDA flood insurance requirements for existing dwellings. If you do have any USDA new construction loan questions, please call my team so we can assist!

USDA Loan Flood Insurance Requirements for Existing Dwellings

Once it has been determined that property is located in a Special Flood Hazard Area (“SFHA”) in accordance with the National Flood Insurance Reform Act of 1994, USDA guidelines state the following:

“Existing dwellings located in flood zones are eligible under the SFHGLP if flood insurance, through FEMA’s National Flood Insurance Program (NFIP), is available for the community and flood insurance whether NFIP, “write your own,” or private flood insurance, as approved by the lender, is purchased by the borrower.”

Additionally, guidelines require that:

“Insurance must be obtained as a condition of closing and maintained for the life of the loan for existing residential structures when any portion of the structure is determined to be located in a SFHA, including decks and carports, etc.”USDA Loan Eligibility for Flood Insurance in Florida, Texas, Tennessee, and Alabama

Do additional structures on the property also require flood insurance?

There is good news for this question! The Homeowner Flood Insurance Affordability Act (HFIAA) of 2014 states:

“flood insurance is not required for any additional structures that are located on the property but are detached from the primary residential structure and do not serve as a residence, such as sheds, garages, or other ancillary structures.”

USDA Loan Flood Insurance Requirements

USDA Minimum Required Flood Insurance Coverage Amount

USDA loan flood insurance guidelines require the applicant to obtain flood insurance when the property is located in a Special Flood Hazard Area (“SFHA”) as determined by the applicable flood insurance maps.  USDA loan flood insurance guidelines require the following minimum coverage:

Flood insurance must cover the lesser of the outstanding principal balance of the loan or the maximum amount of coverage allowed under FEMA’s National Flood Insurance Program (NFIP).”

USDA Loan Flood Insurance Maximum Deductible

USDA guidelines also provide for the following maximum flood insurance deductible amounts:

“Unless a higher amount is allowed by state or federal law (which includes FEMA policies), the maximum deductible clause for a flood insurance policy should not exceed the greater of $1,000, or one percent of the face amount of the policy, or the minimum deductible offered by the borrower’s chosen insurance carrier. Existing dwellings for the SFHGLP are eligible if flood insurance is available.”

(SFHGLP stands for the Single Family Housing Guaranteed Loan Program.)

USDA Loan Eligibility – Flood Insurance Maps Summary

Please remember that today’s topic is not an exhaustive list of USDA loan flood insurance requirements.  However, it does help explain how flood insurance maps affect USDA loan eligibility in Florida, Texas, Tennessee, and Alabama under the USDA Single Family Housing Guaranteed Program.

If you are trying to qualify for a USDA loan in Florida, Texas, Tennessee, or Alabama, do not let USDA flood insurance requirements overwhelm you! It is important to remember the basics and understand that USDA loan eligibility for properties requiring flood insurance applies a common sense approach.

Additionally, understand that while it is possible to qualify for a USDA loans with a property located in a flood zone:

  • certain flood insurance coverage requirements will apply, and
  • certain flood insurance deductibles will be required.

What are the benefits of working with a USDA approved lender?

The USDA loan program can be extremely powerful when you are working with a USDA approved lender that understands the program and has the experience to maximize its potential.

As a USDA approved lender, we are here to help you understand how food insurance maps affect USDA Loan eligibility in Florida, Texas, Tennessee, and Alabama.  This includes explaining USDA flood insurance requirements and walking you through the USDA loan eligibility process step-by-step.

Just call or email to discuss your scenario and let us show you the “Metroplex” difference.

800-806-9836 Ext. 280
SeanS@MPLX.org

I want everyone to make it a great day, and look forward to seeing you right here for the next tip of the week!

P.S. – You can download our “USDA Blueprint for Success” by CLICKING HERE.

How do Flood Insurance Maps affect USDA Loan eligibility in Florida, Texas, Tennessee, and Alabama?

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