FHA Loan Warranty Requirements for a Newly Built Home

The Quick Read: A newly built home financed with an FHA loan needs the builder’s one-year completion warranty. It does not need a ten-year warranty plan, because that rule was dropped years ago. Plenty of older web pages still describe the ten-year rule as current. Your job as a buyer is to make sure the builder paperwork is complete and signed, and to know what the one-year coverage does and does not do.

How an FHA Loan Works on a Newly Built Home

Start with the loan, because the warranty only makes sense in that context. FHA loans are mortgages insured by the federal government. A lender makes the loan, and the insurance protects the lender if the borrower defaults. Lendmire’s FHA loan programs are arranged through wholesale lenders, and the same core rules apply whether you buy a resale or a new build.

Across the wholesale programs Lendmire places FHA files with, the purchase envelope looks like this. Maximum financing is 96.5% of the price or value. The minimum investment is 3.5%, at a decision score of 580 or higher. The home must be your principal residence, and it can have one to four units. A non-occupant co-borrower is allowed.

Mortgage insurance comes in two parts. There is an upfront premium of 1.75% of the base loan, which is usually financed. There is also an annual premium between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. LTV, or loan-to-value, is the loan balance divided by the home’s value. On a thirty-year loan above 90% LTV, the annual premium lasts for the full term. At or below 90%, it ends after eleven years.

For debt-to-income, the base pair is 31/43. That means housing costs up to 31% of income and total debts up to 43%. Documented compensating factors can stretch this to 40/50 at the top tier, and the automated finding governs most files. County loan limits apply, and they change every year. All of this is subject to lender guidelines and full file review. Nothing here is a commitment to lend.

A new build adds one layer on top: construction-stage rules and builder paperwork. That is where the warranty lives.

Which Homes Count as “New Construction”?

FHA sorts homes by how far along they are and whether anyone has lived in them. The label decides which paperwork applies.

• Proposed construction: No concrete or permanent material has been placed yet. Digging footings does not count as permanent material.
• Under construction: Permanent material has been placed, but the home is not 100% complete. It has no certificate of occupancy or equivalent.
• Existing less than one year: The home is 100% complete and has never been occupied.
• Existing construction: The home has been complete for over a year, or it was completed within the year and has been lived in.

A spec home that just finished and has never had an occupant is still treated as new. A house a family lived in for six months is existing construction, even though it is only a year old. The stage at the time the lender assigns the FHA case number matters, so ask your loan officer which bucket your home falls in before you sign a purchase contract.

What Changed: Ten Years Down to One

The old rule is the source of most of the confusion. For a long time, FHA treated a home that was under construction, or existing for less than a year, as ineligible above 90% LTV. There were two ways around that. The home met pre-approval requirements, or it came with a ten-year protection plan that HUD had accepted and insured. HUD set this out in Mortgagee Letter 2019-05. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.

A ten-year plan was an agreement between the borrower and a plan issuer. It carried warranties on the home’s construction and structural integrity. For buyers using the minimum down payment, that meant an extra purchase and an extra layer of paperwork.

HUD removed that requirement. The same Mortgagee Letter drops the policy that required borrowers to buy ten-year plans to qualify for certain loans on newly built single-family homes. The Federal Register final rule removed the regulatory ten-year plan requirements as well. It says the change conforms with the Housing and Economic Recovery Act of 2008.

Here is what stayed. The same rule keeps the requirement that the builder and buyer sign the Warranty of Completion of Construction, form HUD-92544, as a condition of FHA insurance. So two statements you will see online are both wrong:

• “FHA requires a ten-year warranty on new builds.” That was the old rule.
• “FHA requires no warranty on new builds.” The one-year builder warranty remains.

If a page talks about tiered warranty structures as a current FHA requirement, check how old it is. Some pages written under the old rule are still online and still ranking.

What the One-Year Builder Warranty Actually Says

The Warranty of Completion of Construction is short. In the form itself, the builder states that the home is built in substantial conformity with the plans and specifications, including amendments. In plain terms, the house was built the way the approved plans said it would be.

It also protects you against defects in equipment, material or workmanship from the builder, a subcontractor or a supplier. The builder agrees to fix and pay for the defect. The builder also agrees to restore any component damaged during the repair. Notice of a nonconformity can be given within one year of completion or initial occupancy, whichever comes first.

Three details matter:

• Who signs. The builder and the buyer both sign the form.
• Who pays. The builder, not you and not FHA.
• When the clock starts. The sources differ. The form ties the period to the earlier of completion or initial occupancy. The Mortgagee Letter says the one-year warranty commences on the date title is conveyed to the buyer. Do not rely on a summary, including this one. Read the form you sign, and ask your loan officer to confirm which start date applies to your file.

How the Underwriting Works, Step by Step

Here is the sequence on a typical FHA purchase of a new build. Details vary by lender and file.

1. Stage check. The lender confirms which stage the home is in when the case number is assigned.

2. Builder certification. The lender gives the appraiser a fully executed builder certification of plans, specifications and site, form HUD-92541. HUD’s knowledge-base guidance says it must be signed and dated no more than 30 days before the appraisal is ordered. A stale certification is a common snag.

3. What the builder certifies. In the form, the builder certifies that the plans comply with HUD requirements. The builder also commits to furnish the one-year warranty when the property is sold or conveyed, for homes eligible for maximum financing.

4. Appraisal. When a new build is 90% or more complete, the appraiser must list the components still to be installed or completed after the appraisal date.

5. Inspections. Depending on the stage, the file needs the inspections HUD’s handbook requires. The appraisal checks value and condition against FHA’s minimum property requirements. The warranty is a separate item.

6. Binder. The lender keeps the HUD-92541, the HUD-92544, any required inspection reports and the other documents the handbook lists.

7. Closing. The builder and buyer sign the warranty form. Check at the table that a signed copy lands in your file.

Four things decide the outcome: the construction stage, a valid builder certification, the appraisal and inspection results, and the executed warranty form. If one is missing, the file stalls. Builder paperwork is the item buyers forget to ask about, so ask your builder early whether their HUD forms are current.

Required vs. Optional Coverage

Buyers tend to blur three different products together. This table separates them.

The ten-year plan can still exist. A builder may offer one, or a buyer may buy one, but it is a private choice and not an FHA condition. Whether it is worth buying depends on the plan’s terms, its cost and your comfort with the builder. Read the contract before you decide. A retail home warranty is a different product, usually a service contract covering appliances and major systems. It is not the same as the builder’s completion warranty.

Where the General Rule Breaks

A few edge cases change the paperwork.

• Existing construction. A home complete for over a year, or completed within the year and already occupied, is existing construction under FHA’s Handbook 4000.1 glossary definitions. The new-construction warranty paperwork does not apply.
• Manufactured homes. The warranty change covers single-family mortgage insurance. HUD’s glossary gives manufactured homes their own new-construction definition, based on how long the home has been permanently erected before the case number.
• Condominiums. The glossary extends the new-construction concept to condo projects. If you are buying a new condo, ask the lender how the project’s status affects the file.
• Flood zones. New construction in a Special Flood Hazard Area has its own eligibility rules. Raise it early if the lot is near a mapped floodplain.
• Other loan programs. The HUD-92544 form is combined with a VA form. That does not mean VA or USDA terms match FHA’s. If you are weighing programs, Lendmire’s piece VA vs Conventional vs FHA Loan for a Veteran Buying a First Home shows how they differ.

What Happens If You Find a Defect

The builder’s warranty only helps if you use it. A practical routine:

1. Read the signed form and note the start date and the one-year window.

2. Put a reminder on your calendar well before the window closes.

3. Document each defect with dates and photos.

4. Report it to the builder in writing, within the warranty period, and keep a copy.

5. Keep following up in writing if the repair stalls.

The form calls for notice within one year. Do not wait for the last week.

If the Builder Goes Out of Business

This is the real weakness of the current rule. The one-year warranty is only as good as the builder who gave it. If the builder closes, the promise may be hard to collect on. FHA mortgage insurance does not step in here, because it protects the lender and not the buyer. HUD-92544 is a warranty from the builder to you.

Some buyers shop for builders with that in mind: how long they have operated, how they handle repairs, what prior buyers say. Others decide to buy optional structural coverage from a third party. Both are reasonable. FHA does not make the choice for you.

A Fair Question: Did Dropping the Ten-Year Plan Add Risk?

HUD’s own research journal addressed this. It says the change gave consumers flexibility “without measurably increasing the risk to FHA.” The HUD User article also describes the Warranty of Completion as a builder’s warranty on major components such as structure, roof, heating, windows and electrical systems. That is HUD’s view of risk to the FHA insurance fund. It is not a statement about your risk as an owner, and your protection after year one is whatever you arrange yourself.

Three Buyer Scenarios

A completed spec home nobody has lived in. The house is finished, but no one has occupied it. It falls in the “existing less than one year” bucket. The builder’s certification and the warranty form matter. The buyer should confirm both are current before the appraisal is ordered.

A home still under construction. The buyer is financing at up to 96.5% with 3.5% invested, subject to guidelines. The appraisal may list components still to be completed. The risk here is timing: a stale builder certification or an unsigned warranty can hold up the file.

A home that was lived in, then sold. It is existing construction. There is no new-construction warranty paperwork. Inspection and appraisal findings do the work, and the buyer may want a separate home inspection.

Lendmire’s article Can an FHA Loan Close on a Newly Built Home? walks through the closing side in more detail.

Key Terms Defined

Warranty of Completion of Construction (HUD-92544): The builder’s one-year promise to the buyer that the home matches the plans and is free of defects in materials and workmanship.

Builder’s certification (HUD-92541): A signed statement from the builder that the plans, specifications and site meet FHA requirements.

Ten-year protection plan: A third-party structural warranty that FHA used to require on certain new builds. It is no longer an FHA condition.

LTV (loan-to-value): The loan balance divided by the home’s price or appraised value.

Case number: The identifier FHA assigns to your loan file. The home’s construction stage is judged as of this point.

Existing construction: A home complete for over a year, or one that has been lived in.

Next Step

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 figures are subject to lender guidelines and full file review. 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 Mortgagee Letter 2019-05

2. Federal Register final rule, Streamlining Warranty Requirements for FHA Single Family Mortgage Insurance

3. HUD-92544, Warranty of Completion of Construction

4. HUD Handbook 4000.1 Glossary

5. HUD User article