FHA Loan Changes in 2020, What Does it Mean for Flood Insurance Rates?

On day 366 of the flood video blog we are talking about the FHA loan changes for 2020. Each year FHA makes adjustments to their loan amounts. In 2020 a large portion of the country is seeing increases to the loan amount available through this type of loan.

So how will it impact flood insurance?

Let's first discuss what flood insurance options are available on FHA loans? Remember as of 2020 the only flood insurance available on an FHA loan is through the National Flood Insurance Program. It's important to understand that in many situations this option for flood insurance can be the most expensive.

So this time last year you were looking for that dream home but you just could not find the the perfect home that you qualified for with the FHA loan. However this year with the loan increase in your area it has made you qualify for the home you want. 

That's great news!

However lets discuss a few scenarios how this could impact you if the home is in a special flood hazard area.

Let's say last year you only qualified for $225,000 but this year you qualify for $250,000. Awesome you can get a lot more money but what will be the true impact on your wallet. Well if the home is in a special flood hazard area this could impact your pocket by more than $500 a year.

Let's look at another scenario where maybe last year you qualified for $250,000 and now you qualify for $275,000. What will the impact on the flood insurance rates be.

Well initially there will be no impact but how is that its a higher amount. Well the reason is the National Flood Insurance Program does not offer coverage of more than $250,000. For that reason coverage and premium would max out there.

These are just a couple of scenarios of how these new loan changes can impact your wallet. It's important that you sit down with a loan officer and review all the different loan options. Flood insurance options on other loan types can sometimes be up to 50% less. So even if the interest rate is higher the savings in flood insurance might be worth it for you.

If you have questions about what flood insurance options might be available for you then make sure to contact us. You can also check out our daily flood education videos here.