Questions on buying home in flood zone (2013, mortgage, mortgage)

[thinkrevolutionx]

I just have a few questions that i'm really hoping someone would be able to help me out with.

I've fallen in love with the concept of living on the water, and I've basically been saving for just that. Sandy, obviously changed the entire landscape... literally and figuratively. I've done a lot of research, but I have a few basic things i'm still confused about that maybe someone with some experience or professional knowledge could clear up.

1) The "re-adjustment" or removal of subsidies for flood insurance premiums, and it's potential impact. FEMA is very grey area on this in terms of numbers. I've heard the fear mongering media reports, but upon watching all the videos one thing stood out at me. FIRM vs Pre-FIRM. Supposedly, if a town / area already had a FIRM established (flood insurance rate map) prior to the announcing of increases, then it's not subject to those increases? It doesn't make sense to me, but it's in the videos.

2) SBA loans for raising home. I know the SBA offers low interest rate loans for storm damaged homes assuming recurring damage or one major damage (I think it's greater then 50% damage) in order to future proof said home. My question is, as someone who purchased a home, as opposed to the person who actually put in these claims to their insurance when the damage happened - am I still eligible based on the homes history? Or does it follow the home owner themselves.. same question for FEMA grants and what not. If the home owner didn't apply, would i be able to as the owner of the property despite not actually having suffered the damage myself?

3) What other options are their to lifting a home if question 2 isn't an option? Besides cash out of pocket.

[Silverfall]

1) Pre-FIRM and FIRM will essentially no longer matter after Briggert-Waters Act takes effect. The subsidy only remains in effect for primary residences that had NFIP flood insurance as of July 6, 2012 and have maintained the coverage. Most people stop their flood insurance after a couple of years, so the number that get to keep the subsidy is really small. All businesses will lose the subsidy. Also, when someone who does have a subsidy sells their home, the new homeowner can't get the subsidy and will pay the full rate.

It was supposed to take effect in Oct of 2013 but the outrage over the huge flood insurance hikes caused massive backlash and those rate hikes have been suspended for 4 years.

2) SBA loans are only for businesses, unless you have a local loan called SBA or something. NFIP has flood proofing grant programs, but they are only for commercial properties with repetitive losses. Primary residences don't qualify.

3) One of the best things you can do to get the flood insurance rate down is to install the flood vents. They are specially engineered vents. The NFIP pays out a lot in foundation damage, and the flood vents equalize the pressure on both sides of the foundation wall to prevent damage. It can cause a nice big drop in rates if they are installed. They cost about $5k or so to do. Also, removing anything mechanical from basements or crawlspaces will reduce your costs as well. If there is a basement strip it to studs.

[thinkrevolutionx]

Thank you very much for your informative reply.

So if I get what you're saying, basically as someone who would be purchasing a home in a flood zone, there's no chance of a subsidy. If that's the case then, I wonder what the rates are really going to jump to. I guess nobody really knows until it happens?

Either way, I suppose people who are living there now have 3 years until the jump? So October 2016(7?) we will see the big jumps and the exodus?


What i'm referring to specifically with the SBA is this:

Home and Personal Property Loans | SBA.gov

Which states:

Home and Personal Property Loans
If you are in a declared disaster area and have experienced damage to your home or personal property, you may be eligible for financial assistance from the SBA — even if you do not own a business. As a homeowner, renter and/or personal property owner, you may apply to the SBA for a loan to help you recover from a disaster.

Loan Amounts and Use

Homeowners may apply for up to $200,000 to replace or repair their primary residence. The loans may not be used to upgrade homes or make additions, unless required by local building code. If you make improvements that help prevent the risk of future property damage caused by a similar disaster, you may be eligible for up to a 20 percent loan amount increase above the real estate damage, as verified by the SBA.

In some cases, SBA can refinance all or part of a previous mortgage when the applicant does not have credit available elsewhere and has suffered substantial disaster damage not covered by insurance.

Renters and homeowners may borrow up to $40,000 to replace or repair personal property — such as clothing, furniture, cars and appliances — damaged or destroyed in a disaster.




I'm wondering how that works. I have contacted the SBA and am awaiting a reply as well.

[Silverfall]

Originally Posted by thinkrevolutionx

Thank you very much for your informative reply.

So if I get what you're saying, basically as someone who would be purchasing a home in a flood zone, there's no chance of a subsidy. If that's the case then, I wonder what the rates are really going to jump to. I guess nobody really knows until it happens?

Either way, I suppose people who are living there now have 3 years until the jump? So October 2016(7?) we will see the big jumps and the exodus?

If you have the elevation certificate for a house, then your state person for FEMA could tell you what your new rate would have been. Have to have the elevation certificate though. The jumps were huge. $1500 to $6500 was common in some areas here. I know in parts of NYC, the annual rate went up to $15,000 a year.

Originally Posted by thinkrevolutionx

i'm referring to specifically with the SBA is this:

Home and Personal Property Loans | SBA.gov

I learned something new today. Although it won't help you in the situation you are talking about since raising a house is an upgrade and you wouldn't be in a declared disaster area.

You might want to talk to a lender about the full FHA rehab loan (not the streamline) which allows you to do foundation work on a house. Not a lot of lenders do them, but you might be able to wrap jacking up the house and adding flood vents via that loan product. Raising the house might be outside the loan criteria, but worth asking about.