Hi Tabitha
Lenders are being more and more restrictive on the homes they lend on these days. Even if the problems are only "cosmetic" as you say, if there is anything the lender considers a health or safety hazard (water damage is an example), they may decline to lend under conforming or traditional FHA programs.

It creates a catch-22 for buyers and sellers, but that's just the way it is right now especially on bank owned homes since there is no readily available history of upkeep on these properties.

You can always do the 203k loan and refinance into a conforming program later, but I agree with Dave you should address this with your lender to get an explanation.

Best of luck

That is a question you need to be asking your lender.