How a Builder’s Ten-Year Warranty Affects an FHA Loan Approval

The Quick Read: A builder’s ten-year warranty does not decide whether an FHA loan gets approved. HUD removed the ten-year plan requirement for new construction years ago, so today the warranty is an optional extra between you and the builder. What FHA still asks for is a builder certification, required inspections, a signed Warranty of Completion and an appraisal that supports the value. Approval also depends on ordinary borrower qualification, subject to lender guidelines and full file review.

What Was the Ten-Year Warranty, and Why Do People Still Ask About It?

People still ask because the old rule was real and lasted a long time. HUD described the ten-year warranty as an agreement between the borrower and a plan issuer, carrying coverage on construction and structural integrity. Under the old policy, a home under construction, or less than one year old, was generally ineligible for FHA financing above 90 percent LTV unless it was pre-approved or covered by an HUD-accepted, insured ten-year plan. That is why many buyers and builders treated the warranty as the ticket to a low down payment on a new build.

Then the rule changed. HUD Mortgagee Letter 2019-05 removed the ten-year warranty requirement for borrowers qualifying on high-LTV mortgages and retired the related regulations at 24 CFR 203.200 through 203.209. Old web pages, builder brochures and even some lender sites still describe the rule as live. If you read “FHA requires a ten-year warranty,” you are reading stale advice.

Lendmire’s team sees this confusion regularly on new-construction files: a buyer arrives convinced the warranty is mandatory, or convinced that buying one will rescue a weak file. Neither is true.

Why Did HUD Drop It?

HUD dropped it because the plans cost borrowers money and the record showed little benefit to FHA. The Housing and Economic Recovery Act of 2008 eliminated the statutory mandate, though HUD kept discretion to retain the requirement. In the Federal Register final rule, HUD stated that its records showed no warranty claim ever led to an FHA claim for unresolved repairs, damages or foreclosure. It also acknowledged that the plans imposed a significant cost on FHA borrowers.

HUD concluded that required inspections plus the Warranty of Completion do the quality-assurance job more effectively, without the added expense. The ten-year removal applies to case numbers assigned on or after March 14, 2019.

What Does FHA Require on New Construction Now?

FHA requires a builder certification, stage inspections, an appraisal, and a signed Warranty of Completion of Construction. Those items, not a ten-year plan, are what sit in the file. Here is how they fit together.

A later HUD notice, a 2020 HUD mortgagee letter, titled “FHA New Construction Requirements,” consolidated these rules. It removed the Early Start Letter and Pre-Approval requirements, named form HUD-92544 as a requirement for all new construction, and added alternative inspection options. The new rules apply to case numbers assigned on or after January 4, 2021, though lenders could use them earlier.

How the Loan Is Underwritten, Step by Step

The deal works through a fixed sequence, and a gap at any step can stall it.

1. Builder certification. The builder signs Form HUD-92541 for proposed construction, homes under construction, or homes finished less than one year ago. On it, the builder commits to hand the lender the HUD-92544 at sale. The lender must give the appraiser a fully executed copy, signed and dated no more than 30 days before the appraisal was ordered. The underwriter cannot modify the form.

2. Inspections. For proposed site-built homes, the inspections are footing, framing and final. They come from the local authority, an ICC-certified inspector, or, under the ML 2020-36 alternative, a registered architect or structural engineer. Modular, manufactured, condo and under-one-year cases have their own details in HUD Handbook 4000.1, section II.A.8.i.

3. Appraisal. The appraiser reports on the DE Statement of Appraised Value. For new construction, the form states that once specifications are accepted, the builder must warrant that the house substantially conforms to the approved plans and specifications.

4. Warranty of Completion. The builder and buyer sign the HUD-92544. The builder warrants the home was built in substantial conformity with plans and specifications. HUD or VA keeps the right to make the final call on whether a defect exists and whether the builder must fix it. Check the form itself for the exact warranty term before you rely on any description of it, including this one.

5. Underwriting and endorsement. The case binder carries the HUD-92541 and HUD-92544. The underwriter then looks at the borrower: credit, income, ratios and assets.

Notice what is missing from that list. Nothing asks whether you hold a ten-year policy.

What Does the Borrower’s Side Look Like?

Ordinary FHA qualification applies. Across the wholesale programs Lendmire places FHA loans with, the maximum financing on a purchase is 96.5% LTV, which means a 3.5% minimum investment, at a decision score of 580 or higher. The home must be your owner-occupied principal residence, one to four units. Seller or other interested-party contributions can reach 6% of the price, and a non-occupant co-borrower is allowed. County loan limits apply, and they change every year. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.

Mortgage insurance is part of the structure. There is an upfront premium of 1.75% of the base loan, which can be financed, and an annual premium between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. On a thirty-year loan above 90% LTV, the annual premium lasts the term. At or below 90%, it ends after eleven years.

Ratios start at 31/43 (housing over total) with no compensating factors. Documented factors can reach 40/50 at the top tier, and the automated finding governs most files. You can read more about these FHA loan programs on Lendmire’s program page. All of this is subject to lender guidelines and full file review.

Here is the useful point. Before the change, a low down payment on a new build was tied to the plan or pre-approval. After ML 2020-36, FHA no longer ties the maximum financing on new construction to those items. A buyer using a low down payment on a new home no longer needs the ten-year plan to get there.

Where the General Rule Breaks

The “no ten-year warranty needed” rule holds broadly, but several edge cases deserve a look.

Case-number dates. The ten-year removal applies from March 14, 2019 case numbers. The consolidated ML 2020-36 rules apply from January 4, 2021. Some secondary pages blur the two dates. HUD’s own letters are the authority.

Home age. The new-construction paperwork covers homes proposed, under construction, or existing less than one year. An older home is treated as existing construction under normal appraisal and property standards. Confirm the exact one-year definition in the Handbook.

Property types. The consolidated requirements reach site-built homes, condo units and manufactured housing. Modular homes carry different inspection requirements. The Handbook controls.

A builder who still offers coverage. Builders may sell a home with a ten-year structural warranty or a third-party warranty program. That is a private contract. Its terms vary by builder, warrantor and state, and some states impose their own warranty rules. Typical structures run about one year on workmanship, a bit longer on systems, and longer still on structural defects, but your contract is what counts.

Other loan programs. The HUD-92544 combines the old FHA and VA formats, but VA, USDA and conventional loans have their own rules. Check them separately.

Construction-to-permanent and renovation loans. These are a different structure. Do not assume the rules above carry over to them without checking.

Refinancing an older loan. If a loan originally carried a ten-year plan, that plan is a separate contract between owner and issuer. What a refinance asks of it is a question for the lender.

Is an Optional Ten-Year Warranty Worth Having?

It can be worth having as protection, but it is not worth paying for as loan strategy. It does not substitute for a home inspection. It does not replace homeowner’s insurance. It will not make a weak file stronger.

If a builder bundles extended coverage into the price, it may raise the sales price or the loan amount, and a higher loan amount affects your ratios. Ask the builder what is included, who stands behind the coverage, and whether it can be priced separately. Read what the policy excludes before you read what it covers.

Warranty Types Compared

Three Buyer Scenarios

A finished spec home, builder offers no extended warranty. The builder supplies the HUD-92541 and signs the HUD-92544 at sale. The appraisal supports value. Nothing about the missing ten-year plan affects the file.

A home under construction, builder offers a ten-year structural plan. The inspections and certifications still drive the file. The plan is a bonus for the buyer, not an approval item. The buyer should read it for what it actually covers.

A builder who is slow with paperwork. Here the risk is delay, not eligibility. The builder must hand over the HUD-92541 before the appraisal is ordered, and the 30-day freshness limit applies. A buyer can ask early whether those documents are ready.

What to Ask the Builder and the Loan Officer

• Is the HUD-92541 signed and current for this home?
• Which inspections are scheduled, and who performs them?
• Will you sign the HUD-92544 at closing?
• Is any extended warranty included in the price, and who backs it?
• Does the home count as new construction under the one-year definition?

Builders, for their part, can avoid last-minute holdups by getting the certification and inspection paperwork in order before a buyer’s appraisal is ordered.

Key Terms Defined

HUD-92544 (Warranty of Completion of Construction): The form on which the builder warrants the home was built in substantial conformity with the plans and specifications.

HUD-92541: The form on which the builder certifies that plans, specifications and site meet HUD/FHA requirements.

Ten-year protection plan: The former insured warranty plan that FHA once required for certain high-LTV new-construction loans.

Mortgagee Letter: A HUD notice that tells lenders how FHA rules change.

LTV (loan-to-value): The loan amount compared with the lesser of price or appraised value.

Where This Leaves a Buyer

If you are buying a home and want to see whether an FHA loan fits your file, Lendmire can help you compare the options and what each one asks of the file. Program details are subject to lender guidelines and full file review, and nothing here is a commitment to lend.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. HUD-92544 Warranty of Completion of Construction

2. HUD Mortgagee Letter 2019-05

3. Federal Register Final Rule: Streamlining Warranty Requirements for FHA Single Family Mortgage

4. Form HUD-92541

5. HUD Handbook 4000.1