Does an FHA Loan Need a Ten-Year Warranty on New Construction?

The Quick Read: No. FHA dropped the ten-year protection plan requirement, and a buyer financing a new build today does not have to purchase one. A one-year builder’s warranty is still required: the builder and buyer sign form HUD-92544 as a condition of FHA mortgage insurance. Older guides, builder materials, and some agent talk still describe the ten-year plan, so check the date on whatever you are reading.

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

The ten-year warranty was a protection plan sold by a plan issuer and bought by the borrower. It carried coverage on the home’s construction and structural integrity. HUD’s Mortgagee Letter 2019-05 describes it as an agreement between the borrower and the issuer.

Here is the history that causes the confusion. Before the change, a home that was under construction or less than one year old could not be financed above 90% LTV unless it had either pre-approval or an insured ten-year plan. For a buyer using FHA’s low-down-payment structure, that was a real hurdle. Most buyers used FHA precisely because they wanted high leverage. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.

That rule was removed. HUD’s rationale was that its inspection requirements and the builder’s Warranty of Completion give quality assurance more effectively than the ten-year plan, without the added cost.

So why does the old rule keep surfacing? Three reasons:

• Some builder and agent materials were written years ago and never updated.
• Some pages still quote the older handbook definition of a “ten-year warranty.”
• A builder or loan officer may simply be working from habit.

Not a rule. A habit.

What Changed, and When?

The change came in steps. The final rule published in the Federal Register in December 2018 removed the regulatory requirement. It also conformed FHA to the Housing and Economic Recovery Act of 2008 (HERA). HUD then implemented the change in guidance through a 2019 HUD mortgagee letter, which removed the ten-year plan requirement and the old 90% LTV restriction tied to it. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.

A later letter, Mortgagee Letter 2020-36, consolidated the new construction requirements. It did three things:

1. It eliminated the Early Start Letter and the pre-approval requirements. 2. It set one set of requirements regardless of LTV. 3. It made form HUD-92544 a requirement for all new construction.

This article describes the change as “since 2019” and leaves it there. If a precise date matters to your file, ask the lender to point you to the current HUD Handbook 4000.1 language.

What Does FHA Still Require From the Builder?

FHA still requires documentation, inspections, and a one-year warranty on new construction. Removing the ten-year plan did not remove the paperwork. A builder who cannot or will not produce it can stall a loan.

Here is the document trail, in the order it usually appears.

Form HUD-92541, Builder’s Certification of Plans, Specifications, and Site. The builder signs it. The lender gives the appraiser a fully executed copy, signed and dated no more than 30 days before the appraisal was ordered, according to HUD’s form instructions. The same form commits the builder to furnish the lender with the HUD-92544 on sale or conveyance. The underwriter reviews it and cannot modify it.

Required inspections. HUD kept inspections when it dropped the plan. The final rule requires them to be done by qualified individuals. Per HUD’s knowledge base, that means an ICC-certified inspector, or a third-party architect or structural engineer, reported on form HUD-92051 or a state-sanctioned form.

Form HUD-92544, Warranty of Completion of Construction. The builder and buyer sign it at closing. The builder, as warrantor, agrees to correct defects in equipment, material, or workmanship. The final rule kept this as a condition of FHA mortgage insurance.

The lender keeps all of this in the case binder. Across the wholesale programs Lendmire places FHA files with, the pattern is consistent: loans stall when a builder is slow producing the HUD-92541 or the inspection report, not because of anything the buyer did. Ask early.

Builder Warranty vs. Ten-Year Plan: How They Compare

The two are different products with different jobs.

The one-year warranty is not an insurance policy, and it is not a home warranty product. It is the builder’s agreement to fix defects. FHA mortgage insurance, by contrast, protects the lender, not you as the homeowner.

Why Is Ten-Year Coverage No Longer Required?

HUD’s view was that the plan added cost without adding more protection than inspections and the completion warranty already provide. A 2019 HUD mortgagee letter says the change eliminates the additional cost of the plan.

HUD’s economic analysis put numbers on this in aggregate. A HUD User Cityscape analysis estimated annual borrower savings of $21 million to $30 million, plus $341,000 in reduced lender paperwork. Those are totals across all borrowers, not a per-household figure, so do not read them as what you personally will save. The direction is what matters: one fewer premium at closing.

There is a tradeoff, and it is a real one. Your automatic coverage is now one year, not ten. After year one, repairs are on you unless you bought something extra. Budget for that.

What Counts as “New Construction” for FHA?

Classification decides which documents you need. HUD treats a property as new construction if it is any of these:

• Proposed construction. No permanent material has been placed.
• Under construction. Work has started, and there is no certificate of occupancy yet.
• Existing less than one year. The home is 100% complete, under one year from the certificate of occupancy, and has never been occupied.

A finished spec home that nobody has lived in, still under a year old, is new construction and needs the full document set. A home under a year old that has been occupied is treated as existing. That changes the paperwork, so it is worth asking whether anyone has ever lived there.

The appraisal also differs by stage. If the home is under 90% complete, the appraiser documents the floor plan, plot plan, and exhibits to establish size and level of finish. At 90% or more, the appraiser lists the components still to be installed or completed.

Key Terms Defined

Warranty of Completion of Construction (HUD-92544): The one-year builder’s agreement to correct defects in equipment, material, or workmanship, signed at closing.

Ten-year protection plan: A plan bought by the borrower from an issuer covering construction and structural integrity, no longer required by FHA.

Builder’s Certification (HUD-92541): The form where the builder certifies the plans, specifications, and site.

Certificate of occupancy (CO): The local document showing a home is approved to be lived in; it helps decide whether a home is new or existing.

Direct Endorsement underwriter: The lender’s approved underwriter who reviews the appraisal and builder certification for FHA insurance.

What Do the FHA Loan Terms Look Like on a New Build?

New construction gets the same FHA structure as any purchase. Across the wholesale programs Lendmire works with, maximum financing is 96.5% LTV, with a 3.5% minimum investment at a decision score of 580 or higher. FHA also has an upfront mortgage insurance premium of 1.75% of the base loan, which is financed, plus an annual premium that depends on term, loan amount, and LTV. County loan limits apply. All of this is subject to lender guidelines and a full file review, and none of it is a commitment to lend.

The point for this article: the ten-year plan no longer sits between you and that leverage on a new build. For more on how the program works, see Lendmire’s overview of FHA loan programs.

One more practical note. Seller help on a new build has its own limits, which Lendmire covers in its piece How Much Seller Help an FHA Loan Allows on New Construction.

What If a Builder or Lender Still Asks for a Ten-Year Plan?

Ask where the requirement comes from. FHA does not impose it. A builder may include it out of habit or as a sales feature. A lender may have its own internal policy, often called an overlay, that goes beyond FHA’s rules. Overlays vary by lender and are not FHA rules.

Here is a quick way to sort it out:

1. Ask the builder whether the plan is a purchase option or a closing condition.

2. Ask your loan officer whether it is an FHA requirement or a lender overlay.

3. Ask them to point to the current HUD guidance.

4. If it is a lender overlay, a different lender may not have it.

If a seller’s contract mentions the plan, read the language closely. A contract can require something FHA does not.

Should You Buy a Warranty Anyway?

It depends, and this is a genuine toss-up for some buyers. Nothing stops you from buying a ten-year or structural warranty voluntarily, and some builders offer one. It is simply no longer an FHA requirement.

A voluntary plan may make sense if you plan to hold the home long term and want coverage beyond year one. It may matter less if the builder has a strong track record and the home passes thorough inspections. Weigh the cost against the risk of a major structural repair, and read what the plan actually excludes before signing.

For a buyer stretching to use the low-down-payment structure, cash is often tight at closing. A buyer in that position may reasonably decide to skip a paid plan and build a repair reserve instead. A buyer with more room might choose differently. Neither choice is wrong.

Two Short Scenarios

A tract-home buyer. Picture a buyer purchasing a home in a new subdivision that is 100% complete and never occupied. It counts as new construction. The builder provides the HUD-92541, inspections are documented, and the buyer and builder sign the HUD-92544 at closing. No ten-year plan is required. If the builder’s sales material mentions one, the buyer asks whether it is optional.

A custom-build buyer. Say a buyer is building on a lot and the home is under 90% complete at appraisal. The appraiser documents plans and exhibits to set size and level of finish. Inspections happen by stage. The paperwork load is heavier, so the buyer asks the builder early for the certification and inspection schedule.

What About Condos, Manufactured Homes, and Other Loan Programs?

Some secondary sources say the removal also covers condominium units and manufactured housing, not just one-to-four-unit site-built homes. That should be confirmed with your lender before you rely on it for a specific property.

Other programs have their own rules. Do not assume FHA’s treatment applies to VA or USDA loans. Check with the lender for those programs.

Builder volume can matter too. HUD’s form instructions say a builder who has sold or intends to sell five or more new properties in a 12-month period faces additional review. If your builder is a high-volume one, expect that extra step to sit in the background.

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. You can reach the team at 828-256-2183.

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

About Lendmire

Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. 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 Mortgagee Letter 2020-36, FHA New Construction Requirements

4. HUD form HUD-92541, Builder’s Certification

5. HUD User Cityscape analysis