HUD Handbook 4000.1 — Programs and Products - New Construction (06/27/2025)

HUD Handbook 4000.1

i. New Construction (06/27/2025) i. Definitions [Updates to this section must be implemented for case numbers assigned on or after January 4, 2021] New Construction refers to Proposed Construction, Properties Under Construction, and Properties Existing Less than One Year as defined below: • Existing Less than One Year refers to a Property that is 100 percent complete and has been completed less than one year from the date of the issuance of the CO or FHA treats the sale of an occupied Property that has been completed less than one year from the issuance of the CO or equivalent as an existing Property. ii. Eligible Property Types [Updates to this section must be implemented for case numbers assigned on or after January 4, 2021] The following property types are eligible for New Construction financing: • Site Built Housing (one- unit, one-unit with an Accessory Dwelling Unit (ADU), or two- to four-units) • Condominium units in Approved Projects or Legal Phases • Manufactured Housing (one-unit or one-unit with an ADU) iii. Required Inspections for New Construction Financing [Updates to this section must be implemented for case numbers assigned on or after January 4, 2021] (A) Site Built Housing (By Construction Status at Time of Appraisal) (1) Proposed Construction • copies of the building permit (or equivalent) and CO (or equivalent); or • three inspections (footing, framing and final) performed by the local authority with jurisdiction over the Property or an ICC certified RCI or CI (for Modular Housing, footing and final only); or three inspections (footing, framing and final) performed by a disinterested third party, who is a registered architect, a structural engineer, or a qualified trades person or contractor, and has met the licensing and bonding requirements of the state in which the Property is located. (2) Under Construction • copies of the building permit (or equivalent) and CO (or equivalent); or • a final inspection issued by the local authority with jurisdiction over the Property or by an ICC certified RCI or CI; or a final inspection performed by a disinterested third party, who is a registered architect, a structural engineer, or a qualified trades person or contractor, and has met the licensing and bonding requirements of the state in which the Property is located. (3) Existing Less than One Year • a final inspection issued by the local authority with jurisdiction over the Property or by an ICC certified RCI or CI; or a final inspection performed by a disinterested third party, who is a registered architect, a structural engineer, or a qualified trades person or contractor, and has met the licensing and bonding requirements of the state in which the Property is located. (B) Manufactured Housing (By Construction Status at Time of Appraisal) Inspection Requirements (1) Proposed Construction • copies of the building permit, (or equivalent) and CO (or equivalent); or • two inspections (initial and final) performed by the local authority with jurisdiction over the Property or an ICC certified RCI or CI; or certified RCI or CI, the Mortgagee may obtain two inspections (initial and final) performed by a disinterested third party, who is a registered architect, a structural engineer, or a qualified trades person or contractor, and has met the licensing and bonding requirements of the state in which the Property is located. (2) Under Construction • copies of the building permit, (or equivalent) and CO (or equivalent); or • a final inspection performed by the local authority with jurisdiction over the Property or an ICC certified RCI or CI; or certified RCI or CI, the Mortgagee may obtain a final inspection performed by a disinterested third party, who is a registered architect, a structural engineer, or a qualified trades person or contractor, and has met the licensing and bonding requirements of the state in which the Property (3) Existing Less than One Year • a final inspection performed by the local authority with jurisdiction over the Property or an ICC certified RCI or CI; or certified RCI or CI, the Mortgagee may obtain a final inspection performed by a disinterested third party, who is a registered architect, a structural engineer, or a qualified trades person or contractor, and has met the licensing and bonding requirements of the state in which the Property (C) Units in Condominium Project or Legal Phase (Existing Less Than One Year) The Mortgagee must obtain a CO or its equivalent. iv. Required Documentation for New Construction Financing [Updates to this section must be implemented for case numbers assigned on or after January 4, 2021] The Mortgagee must obtain and include the following documents in the case binder: form HUD-92541, Builder’s Certification of Plans, Specifications, and Site; form HUD-92544, Warranty of Completion of Construction; required inspections, as applicable: • inspections performed by an ICC certified RCI or CI or a third-party, who is a registered architect, a structural engineer, or a qualified tradesperson or contractor must be reported on form HUD-92051, Compliance Inspection Report, or on an appropriate state-sanctioned inspection form; and • when a third party, who is a registered architect, a structural engineer, or a qualified tradesperson or contractor, is relied upon for required inspections due to the absence of an ICC certified RCI or CI, a certification from such inspector that they are licensed and bonded under applicable state and local laws to perform the type of inspection completed must be included; Wood Infestation Report, unless the Property is located in a county listed as not required on HUD’s “Termite Treatment Exception Areas” list: o Form HUD-NPMA-99-A, Subterranean Termite Protection Builder’s Guarantee, is required for all New Construction. If the building is constructed with steel, masonry or concrete building components with only minor interior wood trim and roof sheathing, no treatment is needed. The Mortgagee must ensure that the builder notes on the form that the construction is masonry, steel, or concrete. o Form HUD-NPMA-99-B, New Construction Subterranean Termite Service Record, is required when the New Construction Property is treated with one of the following: Termite Bait System, Field Applied Wood Treatment, soil chemical termiticide, or Physical Barrier System is installed, as reflected on form HUD-NPMA-99-A. The Mortgagee must reject the use of post construction soil treatment when the termiticide is applied only around the perimeter of the foundation. local health authority or qualified lab well water analysis; and septic report, where required by the local jurisdictional authority. v. Documents to be Provided to Appraiser at Assignment The Mortgagee must provide the Appraiser with a fully executed form HUD-92541, signed and dated no more than 30 Days prior to the date the appraisal was ordered. For Properties 90 percent completed or less, the Mortgagee must provide a copy of the floor plan, plot plan, and any other exhibits necessary to allow the Appraiser to determine the size and level of finish of the house they are appraising. For Properties greater than 90 percent but less than 100 percent completed, the Mortgagee must provide the Appraiser with a list of components to be installed or completed after the date of inspection. vi. Property Considerations New Construction must meet HUD’s Minimum Property Requirements (MPR) and vii. Mortgagee Review of Appraisal (A) Site Considerations (1) Environmental The Mortgagee must require corrective work to mitigate any condition that arises during construction that may affect the health and safety of the occupants, the Property’s ability to serve as collateral, or the structural soundness of the (2) Operating Oil or Gas Wells If a New Construction dwelling is located within 75 feet of an operating oil or gas well, the Mortgagee must reject the Property unless mitigation measures are (3) Slush Pits If a Property is Proposed Construction near an active or abandoned Slush Pit, the Appraiser must require a survey to locate the pit. The Mortgagee is to assess any impact on the subject Property. (4) Special Airport Hazards If a New Construction Property is located within Runway Clear Zones (also known as Runway Protection Zones) at civil airports or within Clear Zones at military airfields, the Mortgagee must reject the Property for insurance. Properties located in Accident Potential Zone 1 (APZ 1) at military airfields may be eligible for FHA mortgage insurance provided that the Mortgagee determines that the Property complies with Department of Defense guidelines. (5) Flood Hazard Areas If any portion of the dwelling and related Structures or equipment essential to the Property Value is located in a Special Flood Hazard Area (SFHA), the Mortgagee must reject the Property, unless the Mortgagee: • obtains a Federal Emergency Management Agency (FEMA)-issued final Letter of Map Amendment (LOMA) or final Letter of Map Revision (LOMR) that removes the Property from the SFHA; or • obtains a FEMA National Flood Insurance Program (NFIP) Elevation Certificate (FEMA Form FF-206-FY-22-152) that documents that the lowest floor of the residential building, including the basement, and all related Structures or equipment essential to the Property Value are built above the 100-year flood elevation in compliance with the NFIP criteria; • ensures that the Elevation Certificate is completed based on finished The Mortgagee must include the LOMA, LOMR, or FEMA NFIP Elevation Certificate (FEMA Form FF-206-FY-22-152) with the case when it is submitted The Mortgagee must ensure that Flood Insurance is obtained when a FEMA NFIP Elevation Certificate (FEMA Form FF-206-FY-22-152) documents that the Property remains located within an SFHA. (6) Individual Water Supply Systems (Wells) The Mortgagee must ensure that new wells are drilled and are no less than 20 feet deep and cased. Casing should be steel or other casing material that is durable, leak-proof, and acceptable to either the local health authority or the trade or profession licensed to drill and repair wells in the local jurisdiction. A well located within the foundation walls of New Construction is not acceptable except in arctic or subarctic regions. A well water test is required for all newly constructed Properties. The following tables provide the minimum distance required between wells and sources of pollution: Absorption field/100 feet Seepage pit or cesspool/100 feet Sewer lines with permanent water tight joints/10 feet Other sewer lines/50 feet Chemically poisoned soil/25 feet (reduced to 15 feet where ground surface is protected by impervious strata of clay, hardpan or rock) Dry well/50 feet Other – refer to local health authority minimums The following provides the minimum standards for Individual Water Supply Systems (wells): Individual Water System Minimum Property Standards for New 24 CFR § 200.926d(f)(1) and (2) Wells must deliver water flow of five gallons per minute over at least a four-hour period The Mortgagee must submit a valid water test from the local health authority or qualified lab. The report may not be more that 180 Days old from the Disbursement Date. (7) Shared Well A Shared Well is permitted if the requirements in Shared Wells are met. (B) Sales Comparison Approach: Comparable Selection For Properties in new subdivisions, the selected comparable sales must include at least one sale outside the subdivision or project and at least one sale from within the subdivision or project. Completion of Construction Regardless of the inspection process used, the Mortgagee must certify on form HUD92800.5B, Conditional Commitment Direct Endorsement Statement of Appraised Value, that the Property is 100 percent complete and meets HUD’s MPR and MPS.

Source: HUD Handbook 4000.1 — Programs and Products - New Construction (06/27/2025) · source URL · snapshot 8c03836f77f317e1