Sorry to hear this. I, too, am surprised this made it past both the Realtor and the mortgage rep.
Here is another link that addresses FAQ for FHA Condo purchases.......I thought it might be helpful for you to read through these
In circumstances where a property fails to appraise up to the purchase price, it could fail and be terminated. More often, the buyer and seller reach some agreement and the transaction goes forward. It cold require you to bring additional funds for the downpayment, or the purchase price could be renegotiated or some combo of the above.
Best of Luck!!
Deborah "Deb" Madey
Peninsula Realty Group