Avoid an FHA loan if possible....mostly for the PMI forever. If interest rates were higher, it may be worth considering because chances are you'd refi in a few years anyway if rates dropped. With where they are at now, you will likely never refi, which means you will just pay the PMI forever and never get out of it.
I just bought a house and closed in Feb. I was able to get 2.5% on a conventional loan (contract/locked rate in Dec) with only 5% down. [edit] this is on a 30 year loan [/edit] Realistically the upfront cost of FHA vs. conventional is the same.
With FHA, you may only have to put 3.5% down, but you also have to pay 1.75% upfront on the PMI. Granted, this can be rolled into closing costs and financed with the loan, but it's still upfront cost that you have to pay. With my conventional, 5% upfront and normal closing costs......given rates being so low I will never refi this loan.....but I'm happy to know that the PMI of approx $160/month will fall off after 8 years (max....if I feel the value has increased sooner I can petition to have it removed which will likely have me pay for an appraisal out of pocket).
Just some things to think about....but as said, FHA is no longer the deal it used to be.