Buying New Construction: Contracts, Warranties, FHA/VA

The builder contract

Points to read closely in the purchase contract:

• Completion date and delays. For new construction, federal rules let a lender issue a revised Loan Estimate if settlement is expected more than 60 days after the first one, provided the original Loan Estimate said so clearly (12 CFR 1026.19(e)(3)(iv)(F)).
• Warranty terms. Which warranty applies, who backs it, and what it excludes.
• Dispute resolution. The FTC notes that many new-home warranties “offer or require mediation and arbitration for disputed warranty claims.”
• Deposit. How much is at risk if you cancel (see earnest money).

State law may add cancellation rights. In Florida, a contract with a developer for a new condo unit must state that it is voidable by the buyer within 15 days after signing and receiving the required documents. Other states set different rules, or none.

Inspections on a new home

A new home still needs checking. Under FHA rules, lenders financing proposed construction of a site-built home must obtain either the building permit and certificate of occupancy (CO), or three inspections (footing, framing and final) by the local authority or an ICC-certified inspector. For a home under construction, a final inspection or the permit and CO is required.

Lender-required inspections are not the same as a buyer’s own inspection. Whether a private inspector can visit during construction depends on the contract (see home inspection cost).

New-home warranties (FTC guidance)

The FTC separates two products:

Typical builder warranty coverage, per the FTC:

• 1 year: workmanship and materials on most components, such as siding, stucco, doors, trim, drywall and paint;
• 2 years: HVAC, plumbing and electrical systems;
• up to 10 years: “major structural defects,” from some builders.

Builder warranties usually exclude out-of-pocket costs such as moving out during repairs, household appliances, and small cracks in brick, tile, cement or drywall. On paid home warranties, the FTC warns: “A home warranty is only as good as the company responsible for coverage.”

Claims and disputes

The FTC advises: “put your request for repair in writing,” even if the builder has a hotline, and keep records. If a claim is disputed, mediation and then arbitration may be required. “Most warranties require that both parties accept the arbitrator’s decision, without appeal.” Arbitration is generally less expensive than court, “but you can expect to pay up to several thousand dollars.”

If your loan is FHA or VA, the FTC says “you can choose between arbitration or going to court.”

FHA and VA requirements for new construction

FHA. HUD defines new construction as proposed construction, homes under construction, and homes “Existing Less than One Year” (complete, never occupied, and less than one year from the CO). For these loans, the lender’s file must include:

• form HUD-92541, Builder’s Certification of Plans, Specifications, and Site, signed no more than 30 Days before the appraisal is ordered;
• form HUD-92544, Warranty of Completion of Construction;
• the required inspections and a termite protection guarantee (form HUD-NPMA-99-A).

The new construction section of Handbook 4000.1 carries an effective date of November 10, 2026. For the loan itself, see FHA loans.

Warranty of Completion. Form HUD-92544, also used as VA Form 26-1859, warrants against defects in equipment, material or workmanship “for a period of one year from the date of original conveyance of title.”

VA. Since February 2006, VA no longer performs compliance inspections on new construction, “relying instead on local building inspections and construction warranties of 1- or 10-years.” Under Circular 26-25-1 (March 31, 2025), VA provides veterans with resources to resolve builder complaints “instead of interceding.” Builders are still expected to meet state and local licensing requirements. See VA loans.