FHA-Insured Loan Requirement for Newly Built Homes

What condition must be true for Darren and Natalie when purchasing a newly built townhouse?

A. Darren and Natalie are getting a USDA rural development loan.
B. Darren and Natalie are using an FHA-insured loan.
C. Darren and Natalie are using conventional financing.
D. Darren and Natalie made an all-cash offer.

Answer:

The condition that must be true is B. Darren and Natalie are using an FHA-insured loan.

Darren and Natalie, as first-time buyers purchasing a newly built townhouse, must have an FHA-insured loan to ensure that the builder provides a one-year home warranty. The Federal Housing Administration (FHA) requires that new construction homes, including townhouses, come with a one-year warranty that covers the workmanship and materials used in the construction.

This requirement is in place to protect homebuyers like Darren and Natalie from unexpected repair costs in the first year of homeownership. It gives them peace of mind knowing that they have this protection in case any issues arise with the newly built home.

It's important to note that USDA rural development loans and conventional financing do not have specific requirements for new construction homes to have a one-year warranty. An all-cash offer, on the other hand, does not involve a mortgage, so it does not have any requirements related to the type of loan when it comes to home warranties.

By utilizing an FHA-insured loan, Darren and Natalie can rest assured that their newly built townhouse will come with the necessary warranty coverage, making their first-time home buying experience smoother and more secure.