Environmental
Properties in a FEMA-designated Special Flood Hazard Area (Zone A or Zone AE) typically require:
ANo special insurance
BFlood insurance if the property has a federally backed mortgage✓ Correct
COnly earthquake insurance
DAn NFIP exemption certificate
Explanation
Federal law requires flood insurance for properties in FEMA-designated Special Flood Hazard Areas (SFHAs) when the mortgage is backed by a federal agency or federally regulated lender. Rhode Island's coastal location makes flood zone awareness essential.
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Key Terms to Know
Agency
A legal relationship in which a licensee (agent) acts on behalf of a principal (buyer or seller) in a real estate transaction.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
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