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I am considering buying a home that requires flood insurance where the
mortgage would be around $300,000.
Let's say the replacement value of the house is above $250,000 for
arguments sake.
My question is how would a bank allow the mortgage since the
replacement value of the house is less than the coverage amount of
$250,000 as specified by FEMA? Would their be risk to the bank that
the house washes away and presents a deficit?
The home replacement in my case is below $250,000 however. My concern
is that upgrades to the property and future increases in home
values/construction costs would eventually generate a situation where
the house isn't fully covered for me, the homeowner. The bank would
be covered by the mortgage in my case BUT what if I tried to sell the
property? The next owner may not be able to get a mortgage because of
the coverage gap and thus my home value would be depressed.
Comments are appreciated!
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How would I get a mortgage over the amount covered by flood insurance?
