Buying a House in a Flood Zone: What to Know First

Many homeowners dream of living by the beach, having a lakefront property, or being located conveniently along the river with access to downtown. But while waterfront living offers many benefits and a strong appeal for a lot of residents, it also comes with various potential drawbacks that are critical to consider ahead of time, such as the heavily increased risk of flooding and how this can impact your insurance rates. Depending on your home's exact location, you may be required to purchase a flood insurance policy.

If you're in need of coverage for your home, whether it's homeowners insurance or flood insurance, a local independent insurance agent can help you find it. They'll get you matched to each type of policy necessary to protect your property in all kinds of weather. But first, here's a guide to what to know before buying a home in a flood zone.

What Is a Flood Zone?

Before you determine if the home you have your eye on is located in a flood zone, it's first important to understand what a flood zone is. The Federal Emergency Management Agency (FEMA) designates several flood zones on its Flood Rate Map that indicate each geographical area's risk of flooding events within a certain period of time. 

While there are several flood zone designations, they all fall into two major categories:

• Special Flood Hazard Areas (SFHAs): Flood zones that begin with "A" or "V" fall into this category. These flood zones are marked by FEMA as having at least a 25% chance of flooding within a 30-year mortgage period.
• Non-SFHAs: Flood zones with "B," "C," or "X" fall into this category. These flood zones are marked by FEMA as receiving one-third of all flood-related federal disaster relief.

The most common flood zones are A and V. Flood zone A is categorized as a low-lying area in close proximity to at least one body of water, such as a lake. 

Flood zone V refers to properties in coastal regions that may experience hurricanes, flash floods, and other flooding disasters. If you plan to buy a house in either flood zone A or V, be prepared for more expensive flood insurance premiums and a greater risk of property damage due to flooding events.

How to Tell if a House Is in a Flood Zone

You can better understand a property's flood factor score by reviewing FEMA's flood maps on the organization's official website. Doing so can help you reach various conclusions about which home you should buy, such as the fact that buying a house in flood zone AE may be more expensive than one in another location. 

It's also critical to consider that buying a house in a flood zone means you'll likely be required to purchase flood insurance, especially if you have a government-backed mortgage. If you have an FHA loan, you'll also want to become familiar with FHA flood insurance requirements. 

Owners of homes with FHA-insured mortgages now have the option to secure private flood insurance, while in the past, they were strictly required to obtain coverage through the National Flood Insurance Program (NFIP).

How Much Does Being in a Flood Zone Affect Property Value?

Being located in a high-risk flood zone can have a tremendous effect on property values. The more severe an area's risk of flooding, the greater the impact it can have on a home's value. In high-risk flood zones, property values may be lower due to the following factors:

• Greater risk of damage: Obviously, properties located in high-risk flood zones have a much greater chance of being damaged or destroyed by flooding events, which can lead to the need for expensive repairs. Homes that have previously sustained water damage can be less enticing for future buyers as well.
• More expensive insurance: Owners of homes and properties located in high-risk flood zones tend to pay a lot more for flood insurance coverage than those who own similar properties in low-risk zones.
• Less overall demand: Because many residents don't consider the risks of buying a home in a flood zone to be worth it, this creates a limited market demand for such properties, which can lead to diminished property values.

An increased risk of property damage and repairs, along with less market demand and more expensive insurance, creates the perfect storm for lower property values in high-risk flood zones. When considering buying a home in a flood zone, particularly a high-risk flood zone, be sure to consider the potential difficulty in reselling the property in the future.

Is It Worth Buying a House in a Flood Zone?

Perhaps you're still wondering, "Should I buy a house in a flood zone?" While buying a house in a flood zone is well worth it for many residents, a large percentage of the population doesn't consider it to be, given the risks. Here's how you can weigh the potential advantages and drawbacks of buying a home in a flood zone.

Advantages:	Risks:
Possible lower purchase price of the property	More expensive flood insurance
May get to live in your dream location	Flood insurance may not pay to fully rebuild your home if it gets destroyed
Owning a home on a waterfront or in a beach community	May be difficult to sell the property in the future
	Possibility of flooding disasters, damage, and destruction
	Possibility of having to file flood insurance claims
	Possibility of mandatory evacuation in case of a storm
	Possibility of having to stay in a temporary residence while your home gets repaired after a flood

It's also critical to understand that flood insurance doesn't typically cover the cost of temporary housing, even if your home was damaged or destroyed by a flood-related disaster. This can be an additional cost on top of repairs, etc., after a severe storm. 

Also, keep in mind that the current average cost of flood insurance from the NFIP is $888 per year, but your premiums are impacted by your exact location, flood risk, and other factors. Flood insurance from private insurers can vary in price.

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Do You Need Flood Insurance?

Flood insurance is required by government-backed mortgage lenders (i.e., the Federal Housing Administration, Veterans Affairs, and the United States Department of Agriculture) for owners of properties in high-risk flood zones. 

However, flood insurance is sometimes required by private mortgage lenders as well, especially for residents who own homes in high-risk flood zones. But even if you're not located in a high-risk flood zone, you might still be required by your lender to get flood insurance.

How to Get a Mortgage for a House in a Flood Zone

When determining your budget for your next home, you'll need to factor in the cost of its mortgage, of course. But if you're planning to purchase a property located in a high-risk flood zone, you'll also need to budget for the cost of a flood insurance policy. That's because government-backed mortgage lenders are federally required to ensure property owners in high-risk zones secure flood insurance. 

You might not be required to get flood insurance if you buy a home in a low or moderate-risk flood zone or get a conventional mortgage from a private lender. However, any mortgage lender may require you to get flood insurance regardless of your property's flood zone designation. 

The good news is that the property's flood zone should not affect your chances of qualifying for a mortgage loan in any way. You'll go through the same process of applying for a mortgage as you would for a property in any other area.

An Independent Insurance Agent Can Help You Get Flood Insurance

Whether you're eyeing a beachfront cottage or a lake house, a local independent insurance agent can help you get equipped with the right amount of flood insurance. Your agent can shop and compare policies and quotes from multiple carriers for you. 

Ultimately, they'll get you matched to the policy that offers the best overall blend of coverage and cost. And down the road, your agent can help you file flood insurance claims and update your coverage as necessary.