I've been in contact with the mortgage broker and my insurance agent in
attempt to understand the nuances of this scenario. They have
contradicted each other with their answers so far.

The mortgage company told me that I will have full replacement value
through insurance but it will cost extra. They said my insurance
company will understand.

The insurance man said this is not true unless there is something that
he doesn't know. He is still in process of contacting the flood
department to see if any full replacement option is possible. The max
that the flood insurance can cover is the 250k, which could be less
than full replacement.

I like the answers provided that say that as long as the maximum
coverage is obtained the mortgage will be granted. How else would
people buy expensive homes off in these usually lush locations without
this being the case? Maybe they only have mortgages less than 250k?
However, the post suggesting the lenders view of the situation by doug
is what I think is correct. Mortgage companies would not put
themselves in risk for no good reason.

I'm still waiting for the insurance agent to reconnect with me to
fill me in with the info from their flood department. Maybe
supplemental insurance exists. I'm skeptical on the answers provided
by the mortgage broker because the point is mute to them. My real life
case will certainly place the full replacement value of the structure
less than 250k.

BTW, off topic; for those interested in flood insurance coverage. My
insurance agent didn't mention options in coverage yet but I only
asked for a preliminary quote. I have read
(http://www.fema.gov/pdf/nfip/mandpur1.pdf ) that different deductible
levels exist that can greatly effect the premiums. For example a five
thousand dollar deductible might be a good option for areas that very
rarely flood or when most of the home is safe from damage. When I
called for a quote the agent never asked about deductible amounts.
This document outlines the standard deductible amount is $750. Min is
$500 - max is $5000.

Thanks for the responses.

MyHomeRebate.com wrote:
On Fri, 28 Jul 2006 21:55:51 -0700, Joshua Putnam
wrote:

In article ,
says...

Both will explain that your property
insurance has no bearing on any sale of the house
to another party. (His mortgage-worthiness depends
on his credit history, not your insurance.)

If the buyer is unable to insure the house for at least the lesser of
balance of the loan or the replacement cost of the home, then the bank
generally won't accept the mortgage.

e.g. if a home is selling for $400,000, with a $350,000 mortgage and a
replacement cost of $300,000, the lender will generally require
insurance of at least $300,000 replacement cost.


I don't think so and here's why but good question by the OP.
Hint: think about this as if you were the lender !

The " lender " will want to make sure the insurance covers the loan
balance (the net amt. of money he loaned you) and doesn't care about
the market value or replacement value of the home. Of course, the
homeowner might.

This brings up some other questions but I won't get into it here.

// doug //
website: MyHomeRebate.com
"Buy New Homes for Less in Texas"