Hey OP!
A lot of misguided advice here regarding FHA loans. I will try and clarify a few things. If you do not have the 20% required to avoid the Mortgage Insurance then FHA is definitely a good option for you, regardless what is posted here. I would like to start by mentioning that I am not telling you that an FHA deal is better than a conventional one (in most cases that is not true) but FHA loans have a lot of merit and while for some they are the only option for some are a choice even when a conventional loan is an option:
1- Yes FHA loans have MI for the length of the term (does not go away after 20% as you believe), however like the vast majority of the borrowers you will refinance long before the 30 year term is over. IN 3-4 years hopefully the housing market will have increased enough for you to have 20% equity and get rid of this loan.
2- FHA loans could end up costing you less a month. FHA loans have a far better rate than a conventional one (3.75% vs 4%), so you should price both of them before making a decision.
3- FHA loans have far more flexible underwriting guidelines, allowing you to qualify with higher ratios, lower credit and less downpayment. They are not intended to be kept for 30 years, but are a good tool to get you in the house.
4- FHA loans can be streamlined. So say in 8 months rates plummet and you see a rate of 3.25%, you can streamline refinance an FHA loans without any closing costs, without an appraisal, without income and asset documentation. In other words is just another option that HUD has that allows you to take advantage of the lower rate without going thorough the trouble and the cost of a full refinance.
5- FHA loans are assumable, and not all conventional loans are. If you for some reason can not afford the house any more and want to transfer it to someone who can make the payments, providing they can afford them, you can transfer the mortgage and the property to them without them having to sign up for a new loan.
FHA loans are HUD insured loans, they do their job and are not nearly as bad as people believe them to be. Feel free to ask any questions.