Why Shortsales of Foreclousures Bannks reject FHA loans

[Nellys Flores]

I would like to this Forum to understand how big of a problem is my current problem, I'm trying to buy a second property and turn the current one into a rental, I have an FHA loan, I presented 4 offers to 4 diferent properties and all the offers were rejected by the respective banks because " they do not want to deal with FHA, loans. Which triggered the following questions:

1. What is wrong with FHA loans
2. How is possible that bank with a property sitting in the market for 357 days in the market still prefers to reject a full price offer just because is FHA?

I would like to have an idea of how big this problem is and how many people may be affected by it.

[Jon Holdman]

FHA requires an inspection of the property and that it meet certain minimum standards. You say "bank with a property sitting in the market for 357 days". That makes me think you're making an offer on a REO. REOs are rarely in the condition required by FHA. So, the bank knows FHA won't approve the property. It sounds like all your offers were on REOs. I don't think you're going to get one of those accepted. Many REOs won't even qualify for conventional financing, let alone FHA.

FHA loans have been discussed here a bunch lately, even for fixed-up properties. Another problem with FHA loans is that the appraisals have been coming in very low. Even if you and the (non-bank, non-REO) seller agree on a price, the appraisal can come in much lower. For FHA, the appraisal "sticks to the property". Meaning that appraisal applies not just to you but to any FHA buyer. More than one person has said they have stopped accepting offers with FHA loans becuse of these problems.