Sometimes the property can only be purchased with a conventional loan- on some of these Bank owned properties they may be missing appliances or flooring , etc.- so an FHA loan would not 'fly" where as a conventional loan would. FHA loans have much more strict guidelines to adhere to. So to answer your question- the properties condition is what different types of loans will be based on.
The key word is required. The situations where I "require" non-FHA is where I know the home will not pass FHA muster. Knowing that a home will not passs FHA guidelines is simply wasting everyones time. In sutuations where the home may pass FHA would be the seller does not with to perform repairs (For example the seller is very clsoe to a short sale and has no cash for repairs.) In most cases FHA is equivalent to conventional.
Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
Recent changes to appraisal rules (housing bust and banks/attorneys wanting to place blame) has required appraisors to note issues on a conventional appraisal report as well. These conditions made need to be rectified with a conventional loan PRIOR to closing as well. Appraisors have to make sure a home has running water and a heating system on all appraisal now, which wasn't the case a few months ago on conventional appraisals.
If you tender an offer with FHA financing the seller can refuse to accept the offer, counter with terms of conventional financing, or accept your offer with FHA financing. Once you get into contract the seller cannot force you to change terms and get conventional financing. However, if you get into contract with terms of conventional financing and then you change it to FHA during the process you could be viewed in breach of contract if the deal falls apart and your deposit could be at risk.
Talk with your agent/broker.
Lance King/Owner-Managing Broker