North Carolina Real Estate Broker Exam — All Questions

A buyer is purchasing a home in a federally designated Special Flood Hazard Area with a federally backed mortgage. What is typically required?

• a.Nothing, because flood insurance is always optional
• b.Flood insurance as a condition of the loan✓
• c.A waiver of all hazard insurance
• d.Private mortgage insurance instead of flood coverage

When a property in a Special Flood Hazard Area is financed with a federally backed or federally regulated loan, the lender must require flood insurance. Standard homeowners hazard policies do not cover flood damage, so a separate flood policy is needed. Private mortgage insurance protects the lender against default and is unrelated to flood risk, so it cannot substitute for flood coverage.