I stand corrected! Thanks Cindy, I didnt know it was limited more than normal homes, oops.

Many times, the condition report will state whether the plumbing is holding air or if there are noteable leaks. There are some inaccurate condition reports, but yes, if there are major issues, the earnest money will be refundable to an owner occupant using FHA insured financing. Here is the info taken from the nhmsi website regarding earnest money refunded due to inspections:

Purchaser(s) may request that the Sales Contract be canceled if, within 15 days of HUD's
preliminary acceptance, the property is inspected by a professional home inspector who
discovers a structural, roof, system defect, or non-compliance with local codes, zoning, or
building requirements that HUD elects not to correct, or if within such 15 day period, the property
is inspected for the presence of radon by a professional radon inspector to an extent
unsatisfactory to you. A copy of the property inspection report, or radon test report, as applicable,
must be attached to the cancellation request.
The cancellation contingency is limited to structural, roof, defective components within the
mechanical and operating systems (which include the electrical, plumbing, sewage, heating and
air conditioning systems only) or noncompliance with local codes, zoning, or building
requirements. Kitchen appliances, window air conditioner units, light fixtures, receptacles and
switch covers are not included in the operating systems. Equipment age or energy efficiency
ratings are not included in the cancellation contingency. The earnest money deposit will be
returned ONLY if HUD concurs with the home inspection report finding(s).

Same as any other home, you just get an inspection and decide from there if there are any issues you cant handle.