FHA loans do not necessarily close "slower". But it is true that in order to protect the FHA insurance fund as well as borrowers, the property must meet certain minimum property requirements. On a normal FHA loan, those requirements must be met prior to closing, to avoid the risk that the mortgage loan will be ineligible for FHA mortgage insurance. Foreclosures (REO properties) are generally sold as-is, with a prohibition on buyer repairs prior to closing, so buyer/borrowers run the risk that a required repair will be a deal-breaker for their FHA purchase mortgage. This is also true with VA loans.
Conventional loans (i.e., non-government loans, such as conforming loans) evaluate the subject property from a different, more relaxed perspective. Minor issues that could be a deal-breaker on a government loan will usually not be a concern on a conventional loan. (Major issues can be problematic, no matter what type of mortgage.) However, conventional loans generally require larger down payments, especially in the current financial climate, where it has become much more challenging to secure private mortgage insurance (PMI) for conventional loans exceeding 80% of the value.
If you wish to purchase a property that requires repairs (regardless whether or not it's a foreclosure property), and you want to use a government loan for financing in order to do it with little or no down payment, there *are* options. For instance, we could do an FHA rehab loan, which allows the repairs to be financed into the purchase mortgage. Another alternative is a USDA loan, in which the required repairs can be escrowed and completed after closing. And yet another alternative is to buy a HUD home, which is any property that had an FHA mortgage, went into foreclosure, and is now being sold directly by HUD, which oversees FHA. We have a special FHA program for HUD homes that allows certain repairs to be escrowed and completed after closing - and in this program, FHA's normal 3.5% minimum down payment is waived. Buyers only need to put down $100 (yes, that's not a typo - just a hundred bucks).
To discuss your options, please feel free to contact me: James Wheeler, Senior Loan Officer, 813-600-3428.... more