Actually even if you get an FHA for less than 80% LTV you would still have 1.75% of the loan amount in up front mortgage insurance. Of course you could also do a conventional loan at 80% LTV and NOT have any up front mortgage insurance. But the conventional loan may have tougher credit quidelines than FHA.

FHA up front mortgage insurance is 1.75% of the loan amount and can be rolled into the new loan amount or your can pay it up front, or have the seller credit you to pay for it. FHA charges this to pay for insurance against future defaults. If you refinance over the next few years you will get a refund of the part of the up front mortgage insurance you didn't use.

If you borrow above 80% of a homes value, you will have to pay for Mortgage Insurance to cover the Lender's risk for the higher LTV. FHA automatically takes some of the Mortgage Insurance upfront and it is added to your loan amount. By paying for part of the MI upfront it decreases the additional amount you must pay each month for MI. Unlike a Fannie Mae or Freddie Mac Conventional Financing that doesn't have this option. It is designed to help minimize your monthly payment, as MI can be expensive.