What are USDA Loan qualifying requirements for properties in a flood zone?
How does a flood zone impact USDA loan eligibility?
For those who have dealt with this situation in the past, updated USDA guidelines have implemented a key change that will make a significant impact when moving forward on existing properties located in flood zones.
Today’s video tip will keep buyers, sellers, and realtors in the know when USDA financing is involved with a property in a flood zone.
If you are thinking about a USDA loan and the property you have found in Florida, Alabama, Tennessee or Texas is in a flood zone, there is good news!
Review of Previous USDA Requirements
Prior to 12/1/14, USDA guidelines required the following when a property was located in a Special Flood Hazard Area (SFHA):
“A flood elevation certification is also required to ensure the first floor of habitable space (including basements and mechanicals located in crawl spaces) is above the 100 year flood zone elevation.”
At best this could be a tedious process and at worst even if flood insurance was available, being able to move forward was contingent on receiving an acceptable flood elevation certificate as mentioned.
Updated USDA Requirements
Now, we can see another positive change under the updated USDA 3555 regulations which modernize the flood insurance guidelines. Now, they simply require that existing dwellings are eligible if flood insurance is available for the community through:
- FEMA’s National Flood Insurance Program (NFIP) , or
- A policy under the “Write your Own Program”, or
- Private flood insurance as approved by the lender, is purchased by the borrower
Assuming the homebuyer is able to purchase acceptable flood insurance, the need for the additional step required for calculating the base flood elevation is no longer needed for existing properties.
However, obtaining an acceptable flood elevation certificate is still the requirement for new construction properties. If you have questions on how to qualify for a USDA loan on a new construction property, we have a high level of experience on these transactions so please call me team to discuss your questions today.
It is important to not get bogged down into the details on today’s video tip, but instead take away the positive change which now simply requires the need to for the homebuyer to obtain acceptable flood insurance on the property much like other programs require.
Remember to just call or email to discuss your scenario and let us show you the “Metroplex” difference.
800-806-9836 Ext. 280
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.