There are two main reasons why sellers can be hesitant about buyers with FHA loans. Both of these reasons are related to the strict guidelines associated with these government insured loans.
For example, if the home is appraised and the value is less than the agreed price, the seller needs to reduce the price to match or the deal will not go through. This differs from conventional loans, where the buyer has an opportunity to renegotiate.
The other reason is that the guidelines require that appraisers look for certain defects. This includes issues such as safety handrails on open staircases with more than three stairs, any cracks in concrete that could be a trip hazard need to be fixed and appliances and floor coverings need to have at least two years of useful life remaining. If any of the defects are identified, the seller is required to repair them prior to the sale.