Thread: Bank - FHA vs Conventional Loan

Yup. FHA has higher standards for the condition of the house than a conventional loan. The FHA appraiser will be looking for repairs that they will require the seller/bank to perform while a conventional loan won't worry about some of the things FHA does. Banks don't like to do repairs

A lot of foreclosures won't even consider FHA.

Keep trying and hopefully you will get lucky.

FHA loans can very unattractive to banks because they cater to those with less than stellar credit rating and low income individuals. But fha loans are usually available on smaller, independent lenders. Fha does have an adjustable mortgage rate and buy down loans. The disadvantage to fha is the fact that borrowers must pay a 1.5 loan amount for the insurance premium and cannot be cancelled even if the homeowner reaches equity.

I work with bank foreclosures all the time. The offer has to be structured correctly, and the bottom line is what matters to them. Also, just from experience I know if a home will or will not qualify for an FHA loan. FHA requires that a home meet certain standards. If you look at the HUD website, you will see some homes that HUD is selling and they themselves won't insure, which means they don't qualify for FHA financing.
Because Conventional financing is more flexible, that illegal addition is ok, no flooring is ok, no stoves are ok, broken windows are ok and so on.
Your lender can give you the best idea as to what to avoid when looking for a home. Our MLS allows us to stipulate financing that the home will qualify for based on the listing agents recomendation, see if your agent can filter these for you.
Good luck