Most banks are looking for buyers that will put more down payment to show real interest in the property.
Some FHA loans don't close because they're strict with their guidelines.
You have to proove income, credit, reserve, stable employment for 2 years or more, enough PITI([principle tax insurance), they like w2's more then self employed and much more.....
1)Time frame. Very few companies can close an FHA in 30 days.
2) Home has to be in better condition. FHA appraisals are more brutal
4) Most REO's have short contingency periods in there addendums (average 10 days) and "as is" statements
5) There is still the old theory of more money down= better client= less problems.
If you are going FHA have your lender write a letter detailing why you are a great client and how they can close the loan with little issues. I have found this seems to work. If the lender address the asset managers concerns at the offset the client has a better shot.
Personally, I do not think that banks dislike FHA loans so much as they dislike the downpayments of those who wish to purchase a home with an FHA loan. Especially since, when in both REOs and Short Sales, the bank may be looking to the buyer to come up with funds to make up the difference between, say, the appraised value of the home and the sales price, or provide funds to a second lender or pay for repairs or closing costs. Given the problems with appraisals today, a person with only a 3.5% down payment (FHA's minimum down payment), it is unlikely that the buyer with an FHA loan will have any money to cover the difference between the sales price and appraised price if the appraised price comes in lower. As a result, many banks choose a buyer who is slightly more qualified to buy a home.
I'm also noticing that, again, partially because of the situation with appraisals, many private sellers are also choosing to sell to buyers who can afford larger down payments (20-30% and up), and this often leaves out the FHA buyer.
I recently had a buyer who purchased a lovely REO/Foreclosure property from the bank using an FHA loan, and had no problems getting their offer approved. Of course, this buyer (whose credit score was the primarly reason for the choice of FHA loan) also purchased the property with a very close to 38% down payment, and that made her an extremely attractive buyer to the bank regardless of the FHA loan. So, although there were repairs to be made prior to closing, due to her asset position, she had no problems paying for these, and was able to close on the home 35 days later.
So, while I do think that FHA loans are wonderful and help many people purchase homes, for banks and for some sellers, the significantly lower down payments--especially in today's market--can be troublesome after the appraisal.
Good luck and happy house hunting!!
Area Pro Realty
San Jose, CA