Financing advice

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Hello everyone, I'm trying to buy a home that has a legal apt attached as my primary. I foreclosed on a home in March 2008. The local lender told me I'm ineligble for conventional financing and adviced me to do FHA with 15% down? And MIP for life of the loan? Even with all these expenses the deal still has great potential cash flow. I want to do the rinse and repeat FHA strategy. I am now talking to other lenders.
Am I ineligble for conventional financing?
Is it possible to get FHA with 3.5% down?
Would most banks ignore my duplex income, because it's only been owned and producing for 3 months? Sorry so lengthy.