What Is a Flood Certificate and Do You Need One?

If you’re going to buy a home and get a mortgage, you’ll need a flood certificate, often referred to in the mortgage biz as a flood cert. You won’t be able to get financing without one. A flood cert isn’t very expensive at all, probably the least expensive items borrowers are expected to pay. Even if the property is located in the middle of a desert, you’ll need a flood certificate. The official name is the Standard Flood Hazard Determination Form. The form will have the name of the mortgage company and the property address. If the property is located in a flood zone, there will be a box checked indicating so.

Is My Property in a Flood Zone?

Yet there is a difference between a property located in a flood zone and whether or not the physical structure is located within the zone. In this instance, if the property is located in a flood zone but the home is not, it will clearly state so in Section E- Comments. The wording will typically read something like, “The subject property is PARTIALLY WITHIN a Special Flood Hazard Area. The existing STRUCTURE however, is not affected and is not in the floodplain.” The form will also indicate whether or not flood insurance is available. Most areas are, even coastal properties.

Why a Flood Certificate Might Be Required

When homeowners buy insurance to cover the property, they may think that insurance will cover floods, but standard homeowner’s policies do not automatically cover flooding. Instead, a flood policy is an additional one and can be quite expensive. Depending upon the circumstance, a flood policy premium could be up to $2,000 per year more, on top of the standard policy. When you submit an application after picking out a property or even refinancing an existing mortgage and the flood certificate indicates flood insurance is necessary, I can help with finding flood insurance. Insurance premiums are regulated by the state in most instances so flood insurance from one carrier will likely be the same from one company to the next. And as with standard insurance, it is the lender that is designated as the payee.

Who determines whether or not a property is located within a flood zone? That responsibility belongs to the Federal Emergency Management Agency, or FEMA, and is a division within the Department of Homeland Security. FEMA manages the National Flood Insurance Program, or NFIP. If the flood certificate indicates the property is located within a flood zone, then an elevation certificate will then be ordered. This certificate will physically describe whether or not the structure is located with the boundaries of a flood plain. A property can be located within a flood plain but the elevation certificate is needed to document the home is not directly affected.

The flood certificate is one of the first documents ordered upon submission of a loan application. It, along with other documents will be included in the final loan file. It’s one of the first items ordered because if there is an issue with a  property being in a flood zone, it needs to be addressed early on. It’s not something that is ordered toward the end of the loan approval stage.

Takeaway

When sellers list their property they’re probably already aware whether or not the home is located in such a zone. Homes that require flood insurance can reflect in the list price of the home that flood insurance will be needed. Being located in a flood plain isn’t something that should automatically tell buyers they should ignore the home, but instead provides the buyers as well as the lender the information needed to make sure the home is fully protected.