There are several perspectives to this questions, as evidenced below.
Depending on the "bidding" scenario, i.e. multiple offers, they are pretty common place now-a-days...a higher bid will almost always win, however, a conventional buyer may get the home simply because it's a stronger loan product...It really is not that simple but roughly.
If you are not working with a Realtor you really should be.
I hope you've resolved your concerns by now, but just in case there is another option which may be available to you. One of my main lenders sent me a flyer regarding an 80/10/10. This program allows a qualified buyer to do an 80% first mortgage, a 10% second mortgage with 10% down. This allows the borrower to avoid the need for mortgage insurance. You can pay off the second mortgage early if you have available funds and the payments on this portion are typically very low.
The downside may be that the second mortgage is generally an adjustable rate loan which if kept over time could go up substantially. It's also tempting to just maintain the minimal payment which is commonly an "interest only" loan, so you can pay on it for years and not reduce your principle.
For a full explanation of the pros & cons, talk to your lender.
NMLS # 6395
Financing Kentucky One Home at a Time
I answer questions about financing real estate based on my decades of experience dealing with mortgage underwriters. This answer is my personal opinion, has not been reviewed or approved by the company I work for. I do not offer legal or tax advice, if you need answers from an attorney or CPA find one knowledgeable in your local market.
VP of Mortgage Lending
Try if you can to tune out the babble.
Your reality is, you make above list price offers with FHA backed financing and you were unsuccessful.
Time for you to meet up with your agent and discuss why FHA backed mortgages are not competitive. YOUR EXPERIENCE reveals they are not.
The second fantasy you embrace is that there is a difference between FHA or CONVENTIONAL cash. IT's ALL cash at the closing table.
The total amount offered, as you have discovered, is NOT the most important factor.
I will let YOUR REALTOR reveal what is the most important factor to a seller and how you can construct a better FHA offer or a more beneficial conventional offer.
Let me be more specific, what you have identified in your question as the elements you want to tweak will make NO DIFFERENCE regarding making a successful purchase offer. Time to consult with a pro and acquire a house you an call yours.
Conventional is always better than FHA if you have a choice. FHA is very picky about the condition so if that might be an issue just go conventional
Each situation is unique. The entire offer is looked at, not just purchase price. Financing is a key element. 20% down conventional is arguably stronger than fha but either one has the same chance of closing depending on the property. In a condo, i'd definitely go conventional so there are less contingencies to meet. That makes your offer more attractive.
It's really a whole package consideration when an offer comes in. As a buyer, you would be financially better off with 20% down, no mortgage insurance and a stronger equity position. However this may limit the options available to you in your next home. If you find a home that you love, plan to be in for at least 3-5 years or more and can afford with conventional financing, you may be better off in the long run.
Now, to confuse things a bit you do have other options. Conventional financing with 5% or more down exists in many markets and the Mortgage Insurance is less expensive than FHA and will go away when you have enough equity.
Discuss your full situation with your lender. They have all your facts, will better know your market and your goals. Our answers here are subject to our limited understanding of your situation. Best of luck.