Flood insurance

In 1968, Congress created the National Flood Insurance Program (NFIP) in response to increased costs of tax payer funds for flood victims and increasing amount of damage by floods.  An administration under the Federal Emergency Management Agency (FEMA) manages the NFIP.

If you are looking to buy, build, or improve any dwelling / structure that is located in a flood zone (also known as Special Flood Hazard Areas) you will be required to purchase the appropriate flood insurance.

From a lender’s stand point your coverage will have to meet one of the following:

·       Coverage to the  maximum coverage amount ($250,000)

·       Coverage to the loan amount

·       Coverage to the value of the structure in the flood zone

A lender obtains flood certificates for every mortgage request.  The certificate is derived from mapping completed through FEMA of the property in question, and provides the answer of if the property is located in a flood zone or not.

Know Your Loan

When people are shopping for a mortgage, their first concern is usually the interest rate.  This interest rate is obviously a very important factor, but be sure to be aware of other aspects of a mortgage that can have an effect on the interest rate.  Below are some questions you should ask yourself before getting a loan - the answers may change your rate.


1. What is the loan term?  The “loan term” or “length of loan term” means the number of years you will have to repay the loan. Typically, mortgages are 10-, 15-, 20- or 30- year.  A shorter loan will often have a lower interest rate and can save you money over the long term, but your monthly payments will be higher.


2. Is it an ARM?  “ARM” stands for Adjustable Rate Mortgage, which means your interest rate will go up and down with the market rates.  Sometimes ARMs come with a “floor” – or low – and “ceiling” – or high rate pre-determined so you know how much your rate will change.  ARMs can also vary in the length of term, as fixed-rate mortgages do.  ARMs can be very appealing because the introductory interest rate will be so low, but you will want to carefully consider what will happen once the ARM term ends. If you will be able to pay off the mortgage before the ARM expires this may be a good option for you.  If you cannot, think about whether you will be prepared for what will likely be a significant jump in the interest rate.


3. Are there points? If you are buying any ‘points’ – or prepaid interest – this will make your interest rate lower.  One point is equal to 1% of the loan amount.  Pre-buying points can save you money but will require a little more money up front.   You will also want to think about how long you plan to be in the home you are buying as you want to be there long enough to realize the savings of the point(s) you purchased.

Before making a decision on a loan based on interest alone, make sure that you are comparing “apples to apples” with all of the loan terms.