A comprehensive guide to home warranty guide from NMHL mortgage experts.
NMHL Editorial Team2026-02-188 min read
<p>NMHL offers a suite of loan programs, each with unique requirements that can affect whether a home warranty is optional, recommended, or mandatory.</p>
<h3>Conventional Loans</h3>
<p>For conventional loans with a 20% down payment, lenders typically do not require a warranty. However, borrowers with less than 20% down (e.g., 5% or 10%) may benefit from a warranty to protect the equity they’re building. A $500 annual premium rolled into a 30‑year loan at 6.75% adds roughly $3.45 to the monthly payment—well within most DTI limits.</p>
<h3>FHA Loans</h3>
<p>FHA guidelines focus on the property’s livability. If the home’s HVAC, plumbing, or electrical systems are older than 15 years, the appraiser may flag the property as needing repairs. Adding a home warranty can satisfy the FHA’s “repair escrow” requirement, avoiding a costly escrow holdback of up to 5% of the loan amount.</p>
<h3>VA Loans</h3>
<p>Veterans often purchase homes that have been in families for decades. VA lenders may request a warranty for roofs older than 20 years. A premium plan covering roof leaks up to $3,000 can prevent a VA appraisal deficiency that would otherwise delay closing.</p>
<h3>NMHL’s HomeReady Plus</h3>
<p>Designed for borrowers with credit scores as low as 620, this program allows the warranty premium to be financed. The program also offers a <strong>Warranty Credit</strong> of up to $200 for qualified borrowers who enroll in a partner warranty provider, effectively reducing the net cost.
</p>
<p>Running the numbers helps you decide if a warranty makes financial sense. Below is a simple framework you can apply.</p>
<ol>
<li><strong>Estimate Annual Repair Costs</strong>: Use the HomeAdvisor <a href='https://www.homeadvisor.com/cost/' target='_blank'>cost guide</a>. The average annual repair cost for a 30‑year‑old home is $1,200.</li>
<li><strong>Calculate Warranty Premium + Deductible</strong>: For a standard plan, $450 premium + $75 deductible = $525 first‑year outlay.</li>
<li><strong>Compare Scenarios</strong>:
<ul>
<li><em>No Warranty</em>: You pay $1,200 out‑of‑pocket on average.</li>
<li><em>With Warranty</em>: You pay $525 (premium + deductible) and any additional service calls (average 1.2 calls per year = $90). Total ≈ $615.</li>
</ul>
</li>
<li><strong>Break‑Even Point</strong>: If you anticipate a major repair (e.g., furnace replacement at $2,500), the warranty saves you $1,885.</li>
</ol>
<p>For homes older than 25 years, the break‑even point often occurs within the first two years, making a warranty a prudent hedge.</p>
<p>Filing a claim can feel daunting, but following a clear process reduces stress and speeds resolution.</p>
<h3>1. Identify Coverage</h3>
<p>Check your contract’s list of covered items. For example, a broken condenser coil is covered under most standard plans, while a clogged drain line may be excluded.</p>
<h3>2. Gather Documentation</h3>
<ul>
<li>Take clear photos of the malfunction.</li>
<li>Locate the purchase receipt or warranty sticker.</li>
<li>Note the date the issue began.</li>
</ul>
<h3>3. Contact the Provider</h3>
<p>Most providers have a 24‑hour hotline. Provide your contract number, a brief description, and attach the photos. Expect a response within 24 hours.</p>
<h3>4. Approval & Scheduling</h3>
<p>Once approved, the provider will assign a licensed contractor. NMHL’s <em>Preferred Contractor Network</em> often includes these technicians, ensuring quality work.
</p>
<h3>5. Follow‑Up</h3>
<p>After the repair, keep the invoice and a copy of the work order. This documentation is useful if you need to dispute a claim or for future resale disclosures.</p>
<p>Understanding the distinction prevents costly overlap.</p>
<ul>
<li><strong>Homeowners Insurance</strong> protects against external events—fire, wind, theft, liability. Typical premiums range from $800 to $1,500 annually for a $250,000 home.</li>
<li><strong>Home Warranty</strong> covers internal system failures due to wear and tear. Premiums are $350‑$650 annually.</li>
</ul>
<p>Both policies can coexist. For example, a burst pipe caused by a frozen pipe (covered by insurance) may also trigger a warranty claim for the damaged water heater. In such cases, the insurance pays first; the warranty may cover the remaining repair cost after the deductible.</p>
<p>NMHL recommends maintaining both policies for comprehensive protection, especially for borrowers with limited emergency savings (less than three months of expenses).</p>
<p>NMHL’s mission is to serve borrowers who face credit challenges, self‑employment income verification, or recent financial hardship. Here’s how a home warranty can be a strategic tool for these groups.</p>
<h3>Low Credit Scores (620‑680)</h3>
<p>Borrowers with lower scores often have higher interest rates. By rolling a $500 warranty premium into the loan, they can preserve cash for a larger down payment, which may lower the rate by 0.125%‑0.250%.</p>
<h3>Self‑Employed Income</h3>
<p>Self‑employed borrowers may have variable cash flow. A predictable monthly warranty cost (e.g., $45/month) simplifies budgeting and can be deducted as a business expense if the home is partially used for business.</p>
<h3>Recent Financial Hardship</h3>
<p>For borrowers emerging from a short‑term hardship, NMHL’s <strong>Recovery Advantage</strong> program allows a 12‑month grace period on the warranty premium, giving them time to rebuild savings while still protecting the home.</p>
<p>The home warranty industry is evolving alongside smart‑home technology.</p>
<ul>
<li><strong>IoT Monitoring</strong>: Providers are beginning to offer remote diagnostics for HVAC systems, reducing service call fees by up to 30%.</li>
<li><strong>Dynamic Pricing</strong>: Some insurers use AI to adjust premiums based on real‑time usage data, rewarding energy‑efficient homes with lower rates.</li>
<li><strong>Extended Coverage</strong>: New add‑ons cover solar panel systems and home battery storage, which are increasingly common in NMHL‑financed homes.</li>
</ul>
<p>When you work with NMHL, you’ll have access to the latest warranty options that align with emerging smart‑home standards, ensuring your home remains protected as technology advances.</p>
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Frequently Asked Questions
A standard home warranty covers major systems such as HVAC, plumbing, and electrical, plus up to three appliances like a refrigerator, dishwasher, and oven. Premium plans add coverage for items like washers, dryers, and limited roof leak repairs, with annual limits ranging from $5,000 to $10,000.
Yes. NMHL allows you to finance the warranty premium as part of your loan balance. For a $500 premium on a 30‑year loan at 6.5%, the added monthly cost is about $3.20, keeping your upfront cash needs low.
While not universally required, some loan programs—especially FHA, VA, and NMHL’s HomeReady Plus for older homes—may mandate a warranty to meet property condition standards. Even when optional, a warranty can strengthen your loan application by reducing perceived risk.
Compare coverage limits, annual premiums, and service call fees. Look for providers with an A‑ or better BBB rating, an A‑M rating from AM Best, and transparent contract language that lists exclusions clearly.
Annual premiums range from $350 for basic coverage to $650 for premium plans. Service call fees usually fall between $50 and $100 per claim. Adding the premium to a mortgage spreads the cost over the loan term, often adding less than $5 to your monthly payment.
Most providers allow unlimited claims, but they may impose a cap on total payout—commonly $5,000 to $10,000 per year. Exceeding the cap may require you to pay out‑of‑pocket for additional repairs.
Yes, most warranties are transferable to a new owner for a nominal fee (often $50‑$100). Transferring the warranty can add value to your listing and may help close the sale faster.
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