Great question. I am by no means a real estate attorney, but my understanding of how eminent domain works is that they should pay fair market value for your property, and then you would need to find a new house with the money you obtained from the sale of your home. If you currently have a mortgage on your home, whatever the difference was between the sales price and the mortgage payoff would essentially be your 'equity.' This could be used to pay a down payment on a new home.
If you have any more questions regarding specific mortgage related questions or to discuss your options of obtaining a new mortgage, feel free to contact me at 256-694-7514 or visit my website at http://www.MortgagesCanBeSimple.com.
District Lending Manager
Consumer First Mortgage, Inc.