I completely agree with Kerry Harvell on this one, as we are starting to see many of the current REO and Short Sale type properties on the market take "stronger" offers that are cash or conventional financing with more than average down. There are however some banks that will consider doing FHA financing for Seaside homes. My suggestion to you is this: unless you are anxious and in a hurry to make your purchase, I would wait for a few more months as a new wave of homes hit the market and average prices are lowered because of it, as you will be in a stronger position to acquire a home even with FHA. I expect the buyer pool will thin out significantly because of the impending failure of many commercial and industrial sectors which will hopefully create less competition for you entering the housing market. Residential prices will continue to drop as more foreclosures hit the market which now include many "prime" people who loss their homes due to rising unemployment rates, rise of inflation and or expected deflation, higher tax rates, etc. So the bottom line is that you can wait a while longer and get more house at an affordable price in 6 months or so. Best of luck to you!