A short sale property is a pre-foreclosure listed for sale with a Realtor. The price at which a short sale will sell is subject to bank approval. The buyer may be asked to pay off back HOA dues, liens, etc., if any.
An REO is a bank owned property that failed to sell at auction and is now listed with a Realtor.
You can almost always obtain financing on a short sale or REO properties.
When you want to buy a home the best place to start is to hire an EXCLUSIVE Buyer Agent, not just a Buyer's Agent. EBAs only work with homebuyers and there is never a conflict of interest that will jeopardize your negotiating position. I can refer you to an EBA in your area, if you like.
I've written a best selling book called Buying a Home: Don't Let Them Make a Monkey Out of You. It'll teach you how to buy a home and get a mortgage without getting ripped off. Follow the link below.
Best of luck!