Secondly, in deciding whether to FHA or not to FHA you need to look at your own finances.
Do you have 20% down? If the answer is no, then FHA is your own viable option, because conventional high LTV programs have much higher rates, as well as MI.
If you do have 20% down and don't mind putting it down, then of course you should go conventional: No MI, the lowest rates you can get for any type of loan product.
The closing costs will be slightly higher on FHA, since you'll have to pay upfront mortgage insurance (2.25%) which can be put on top of the loan.
So put simply: if you have 20% down- go conventional, if you don't FHA is a better option for you.
Faith Home Loans
Minimum Down Payment = 3.5% FHA, 5% Conventional
Up-Front = 2.25% (until Oct 4th, then 1%) FHA, 0% Conventional
Monthly = .55% (until Oct 4, then .9%) FHA, .94% Conventional (may vary by area)
Qualifying = More forgiving FHA, Less forgiving Conventional
Credit Score = 500 Min Score (although investors normally require 620) FHA, 660 (with less than 20% down) Conventional
What I normally recommend, based on current MI charges, is that if you plan to put less than 10% down, FHA is a good option providing less down with a lower payment compared to Conventional. A lot of people are looking to conserve cash with the state of our current economy. A good way to do that is with less money down (FHA @ 3.5%) and with the FHA payment (less than Conventional when comparing minimum down, due to MI charges up to Oct 4).
If you have 10% or more down, Conventional is the better option due to the change in mortgage insurance charges. Instead of .94% it may drop to about .64%. That helps to drop your payment and make Conventional loans the better option. At 20% down Conventional is a must. Conventional with 20%+ down does not require mortgage insurance while FHA loans will.