compare the payment schedules between the 2 types of loans you are thinking about.
a conventional loan has a fixed payment schedule, you will pay the same amount every month over the life of the loan, the only thing that will change is how much goes towards interest and how much goes towards principal. Bank of America can provide you with the payment schedule. The interest rate will be higher now, but will never change. rates are low now this is a good time to get a conventional mortgage. I did and i work for a bank.
your FHA loan appears to be an ARM or adjustable rate mortgage. the interest rate will be lower initially, but will go up after your interest only period expires, at which point you may have to pay a balloon payment and your rate will adjust according to the schedule in your mortgage documents, as will your payments. so if the interest rate goes up a few points, your payments could go up a couple of hundred dollars a month.
If you've been paying attention to the issues in the mortgage industry, the majority of foreclosures are on homes with ARM's. many people did not fully understand how much their payments could go up and did not plan for the increase.
my suggestion to you, as a first time home buyer is to find the best fixed rate mortgage you can get, put as much down as you can afford. since you said the home needs work, get a HELOC, use that line for all the work your will do.
you can deduct the interest you earn off any mortgage and HELOC from your income taxes.
one caveat regarding the tax credit, while it is refundable (you can use it towards getting a refund) you HAVE to PAY IT BACK. check out www.irs.gov