For decades, buyers of newly built homes who relied on Federal Housing Administration (FHA) financing faced a key barrier: a mandatory 10-year warranty on the home’s construction.
While designed to protect consumers, this requirement often added complexity and cost, particularly for first-time buyers with minimal down payments.
In March 2019, a pivotal shift occurred. The FHA formally rescinded this longstanding requirement, making homeownership more attainable for thousands of Americans. Here’s a look back at the policy, why it existed, and what led to its reversal.
Apply for an FHA loan with GO Mortgage.The origin of the 10-year FHA warranty rule
The 10-year warranty requirement was originally established as a consumer protection measure. When buyers financed new construction through FHA loans—especially with low down payments—HUD (the Department of Housing and Urban Development) sought to ensure long-term structural quality and workmanship.
Under the policy in place before 2019, any newly built home with a loan-to-value (LTV) ratio above 90% (typically FHA’s 3.5% down option) needed to be backed by a third-party, HUD-approved 10-year warranty.
This warranty had to cover structural integrity and other key elements of the home’s construction.
For builders, that meant either purchasing the warranty (often at a steep cost) or opting out of marketing their homes to FHA buyers.
For buyers, it often translated to fewer options—especially in the entry-level housing market.
The unintended consequences
While the intent was noble, the real-world outcomes were restrictive. The warranty policy created multiple challenges:
- Limited builder participation: Many builders chose not to engage with FHA financing due to the added cost of securing a 10-year warranty.
- Reduced buyer access: Prospective buyers with limited down payments—FHA’s core demographic—had fewer new construction options.
- Marketing roadblocks: Builders couldn’t advertise homes as “FHA-eligible” unless the warranty was in place, narrowing their sales reach.
As a result, the warranty rule inadvertently stifled homeownership opportunities, especially during a time when housing affordability was already strained.
A turning point in 2019
On March 14, 2019, the FHA issued a policy update removing the 10-year warranty requirement for new construction homes. This applied to FHA case numbers assigned on or after that date and affected a broad range of properties:
- Single-family residences
- HUD-approved condominium units
- Manufactured homes are eligible under FHA’s single-family mortgage insurance guidelines
This change was part of a broader effort to streamline FHA processes and make mortgage access more flexible without compromising borrower protection.
What replaced the 10-year rule?
While the long-term warranty requirement was lifted, FHA didn’t abandon quality assurance entirely. A 1-year builder warranty remains in effect for all newly constructed homes financed through FHA.
This one-year warranty—provided by the builder or seller—must:
- Cover materials, equipment, and workmanship
- Guarantee the home conforms to HUD-approved plans and specifications
- Be active at the earliest of occupancy, title transfer, or construction completion
Unlike the 10-year plan, this warranty is more affordable and widely accepted, helping both builders and buyers participate more freely in FHA transactions.
Why the FHA made the change
FHA’s core mission is to make homeownership accessible and sustainable, particularly for first-time buyers and those with modest means. Removing the 10-year warranty requirement achieved several objectives:
- Increased builder participation: With fewer compliance hurdles, more builders became willing to offer FHA-financed homes.
- Expanded buyer access: The policy opened the door to more new construction options for buyers using FHA loans.
- Simplified financing: Eliminating a costly third-party warranty helped reduce overall costs and streamline loan approvals.
In essence, the policy shift reflected a rebalancing, retaining basic protections for buyers while eliminating burdens that often kept them out of the market.
What this meant for buyers and builders
This regulatory change immediately impacted how new homes were built, marketed, and financed nationwide.
For buyers:
- Greater access to FHA financing on move-in-ready homes
- The ability to purchase with just 3.5% down, even on new construction
- Fewer barriers to entering the housing market
For builders:
- Elimination of a costly and complex warranty requirement
- Easier marketing of FHA-eligible homes
- Access to a broader buyer pool, especially budget-conscious shoppers
Key questions buyers still need to ask
Even without the 10-year warranty, FHA-financed new construction still has unique requirements. Buyers should be proactive and ask the following:
- Is the builder registered with HUD?
FHA loans require the builder to be HUD-registered. - What does the 1-year warranty include?
Confirm the coverage in writing and review for completeness. - Is the home FHA-eligible?
Some properties may still not meet FHA standards for safety or appraisal. - Are there HOA fees or community rules?
These can impact your debt-to-income ratio during loan qualification.
Why this change still matters today
Looking back, FHA’s removal of the 10-year warranty requirement was more than a bureaucratic update—it was a milestone in mortgage accessibility.
It reflected evolving market realities, builder preferences, and the growing need to support first-time homebuyers.
More than five years later, the effects are still felt. Builders continue to benefit from simplified processes, and buyers enjoy greater choice and affordability in the new home market.
Start your new home journey with GO Mortgage—we’re here to guide you from contract to closing with confidence.
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Our experienced team will guide you through the pre-approval, builder coordination, and closing process—step by step.
Summary at a glance
- The FHA formerly required a 10-year builder warranty for new construction homes with low down payments.
- This rule was eliminated in March 2019, making FHA financing more accessible.
- A 1-year builder warranty is still required to ensure basic buyer protections.
- The change supports broader access to homeownership and simplifies builder compliance.
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