FHA is a great product. 97% financing, low fixed rates, easy credit qualifying. But, FHA charges 1.5% of your loan amount as an upfront mortgage premium. Then you'll pay .5% annually, paying 1/12th monthly as part of your normal mortgage payment in monthly mortgage insurance. FHA also is stricter on condition of the property, so on an older home, you might identify and correct issues that wouldn't come up with a conventional loan.
Doing 100% financing using conventional loans is often cheaper in the long run, if you have great credit. Slightly lower rates might be available, but mainly, if you have strong credit (680 scores or higher, even 660 in some cases), you can often get lower fixed monthly payments by doing an 80/20 conventional. This means an 80% first mortgage, a 20% second mortgage, and no mortgage insurance is required.
I just did a direct comparison between the two for a client of mine. In her case, with strong credit, the monthly payments ended up being almost the same, however, with the FHA she put more money down, and it was about $1500 more expensive. Not a huge difference, but enough to say that for her, it might not be her best solution. FHA was cheaper than a 100% conventional loan with mortgage insurance though.
So, long story short: 680 scores and higher, a conventional 80/20 might be cheaper. 660 scores should look at both. Anything below 660, FHA is likely the best deal in town. And FHA does NOT have a minimum credit score. They mostly just want to see that the past 12 months were spotless, and the past 24 months are pretty good on payment history.
10 years in mortgage banking