FHA Loan New Build Requirements for a First-Time Buyer

The Quick Read: An FHA loan can finance a newly built home, but the builder, the property and the borrower each have to meet a set of requirements. The builder signs a certification and a one-year completion warranty. The home needs an appraisal and either a certificate of occupancy or an acceptable final inspection. The borrower must meet FHA credit, income and minimum-investment standards, subject to lender guidelines and full file review.

What Counts as a “New Build” to FHA?

FHA treats three situations as new construction: a home that is proposed, a home under construction, and a home less than one year old. That is the line the document package follows. HUD’s reference guide on construction and new homes lays out the paperwork for each.

There are two common paths for a first-time buyer:

Most first-time buyers land in the first column. Many online pages blur the two, and the difference matters for which requirements apply.

The Borrower Side: What the File Has to Show

The leverage rules for a new build are the same as for any FHA purchase. Across the wholesale programs Lendmire places FHA files with, maximum financing is 96.5% of value with a 3.5% minimum investment, at a decision score of 580 or higher. HUD has a lower tier, 500-579 with 10% minimum investment. The wholesale network does not reach below 580. Some lenders set floors above that, which is why two lenders can give a different answer on the same file.

Other borrower rules:

• Occupancy. The home must be your principal residence. One to four units are eligible if you live in one of them.
• Ratios. The base pair is 31/43 (housing and total debt to income) with no compensating factors. Documented factors can push that to 40/50 at the top tier. The automated finding governs most files.
• Seller or builder contributions. Interested-party contributions go up to 6% of the price. Builder credits count against that limit. They are not a price cut.
• Co-borrowers. A non-occupant co-borrower is allowed.
• Loan limits. County loan limits apply and change every year. Check the limit for the county where the home sits.

Lendmire’s FHA loan programs page covers the base program in more detail. Every figure here is subject to lender guidelines, and none of it is a commitment to lend.

Mortgage Insurance on a New Build

FHA mortgage insurance has two parts. The upfront premium is 1.75% of the base loan and is usually financed into the loan. The annual premium runs between 0.15% and 0.75% of the balance, depending on term, loan amount and LTV. HUD cut the annual premium in Mortgagee Letter 2023-05, effective for loans endorsed on or after March 20, 2023.

Duration matters. On a thirty-year loan above 90% LTV, the annual premium lasts for the term. At or below 90% LTV, it ends after eleven years. A new build at 96.5% financing falls in the first group. That is a program fact, not a price. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.

The Builder Side: Certification and Warranty

The builder is a bigger part of an FHA file than most buyers expect. Two forms carry the weight.

HUD-92541, the builder’s certification. The builder certifies the plans, specifications and site. Per the HUD reference guide, the lender must hand the appraiser a fully executed form signed and dated no more than 30 days before the appraisal was ordered. The form also commits the builder to deliver the completion warranty at sale. The appraiser reviews the site information and notes any difference from what is actually on the lot.

HUD-92544, the Warranty of Completion of Construction. This is a one-year builder warranty. It covers defects in equipment, material or workmanship from the builder, subcontractors or suppliers.

The Ten-Year Warranty Is Gone

This is the most common outdated claim. HUD Mortgagee Letter 2019-05 removed that requirement. HUD said the inspection requirements and the one-year warranty do the quality-assurance job and avoid the added cost of the plan. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.

So the ten-year plan is no longer an FHA requirement. A builder may still offer one as a marketing feature. Ask what is actually being offered and who backs it.

The Document Package, Step by Step

For a proposed, under-construction or recent build, the lender builds a package. This is how a file typically runs.

1. Builder certification. The signed HUD-92541 goes to the lender, then to the appraiser, dated within the window above.

2. Appraisal. The appraiser values the home and checks the site against the certification. On a home that is at least 90% complete, including homes under one year old, the appraiser does not need the plans and specs.

3. Supporting documents. Depending on the property, the file may need termite forms, a building permit or early start letter, flood-zone documents, well-water tests, and local health authority approval for private water and sewer.

4. Completion evidence. The file needs a certificate of occupancy or an acceptable final inspection. Where no local inspection exists, lenders typically accept a registered architect or structural engineer.

5. Warranty delivery. The builder gives the lender the HUD-92544 at sale or conveyance.

6. Disclosures. The Loan Estimate must reach you within three business days of application. You must receive the Closing Disclosure at least three business days before closing, per the CFPB guide to the Loan Estimate and Closing Disclosure.

Missing pieces cause most of the friction. A stale certification, a missing certificate of occupancy or an unsigned warranty will stall a file.

Who Does What

Custom Builds: Construction-to-Permanent

If you are building on land you own or are buying, the FHA one-time-close structure combines the construction loan and the permanent mortgage in one closing. You must have a contract with a builder. FHA does not allow you to act as your own builder.

Three points trip up first-timers:

• Loan amount. It is based on the lesser of appraised value or documented acquisition cost. Acquisition cost includes the builder’s price, extras you pay for, the land and interim financing costs.
• Land equity. Equity in land you already own can count toward the minimum investment, if the lender documents it.
• Land ownership timing. Some lenders apply a look-back on how long you have owned the lot. Confirm that with your loan officer before you sign.

The loan is underwritten up front. The home still has to reach completion and clear final inspection or certificate of occupancy documentation.

Where the General Rule Breaks

• Builder incentives tied to a lender. Builders often offer closing-cost credits for using an affiliated lender. You are not required to use that lender. Compare a fresh Loan Estimate from another source against the builder’s. A credit can be offset by terms elsewhere in the offer.
• Property taxes. A new build may be assessed as vacant land at first. The first-year escrow can then understate the eventual tax bill.
• Manufactured and modular homes. Rules differ by home type. Ask the lender before you assume a product is eligible.
• Second homes and rentals. FHA is for your principal residence only. Occupancy decides the leverage.
• Stricter lender floors. HUD sets one set of minimums. Individual lenders can set stricter credit or ratio requirements.

Common Mistakes

• Relying on an old article that still lists the ten-year warranty.
• Assuming the builder’s certification and FHA appraisal replace a home inspection. They do not. Hire an independent inspector.
• Treating builder credits as free money. They count toward contribution limits.
• Skipping a second Loan Estimate.
• Ignoring the county loan limit.
• Waiting on the certificate of occupancy paperwork until the end.

Pros and Cons for a First-Time Buyer

Readiness Checklist

• Confirm county loan limits for where you plan to buy.
• Ask the builder for the HUD-92541 timing and warranty plan.
• Ask whether the home is proposed, under construction, or under a year old.
• Request Loan Estimates from more than one source.
• Line up a home inspector of your own.
• Gather income, asset and gift documentation.

Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.

Key Terms Defined

HUD-92541: The builder’s certification of the plans, specifications and site.

HUD-92544: The one-year Warranty of Completion of Construction the builder gives the lender.

Certificate of occupancy: Local proof that a home is complete and fit to live in.

Construction-to-permanent loan: One closing that covers the build and then becomes the long-term mortgage.

Upfront mortgage insurance premium: An FHA charge of 1.75% of the base loan, usually financed.

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.

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

About Lendmire

As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. HUD Archives, Reference Guide: Construction and New Homes

2. HUD Mortgagee Letter 2023-05

3. HUD Mortgagee Letter 2019-05

4. CFPB Guide to the Loan Estimate and Closing Disclosure