There is some misunderstanding here.Who allocates tax credit programs will differ state to state, who takes the lead, but it will be under your economic development office.Fed money goes to the states and then they allocate the projects.Section 42 requires the authority to approve the bonding, bonds are sold to raise the capital you don't receive the tax credits, the investors do.You also must have a syndicator and management in place that can show experience in managing tax program properties, if they mess up it disqualifies the tax credits and hen you will have big issues.A 100% development isn't a good idea really as you need some market rates for operations that can't be covered by subsidies and it gives you fluff room in keeping the units qualified.

My SOW leaves no room for interpretation or misunderstanding. 

A misunderstanding of this information, along with attempting to build within the setback without prior approval will bite you every time.

Am I misunderstanding how the USDA loan works, or should I just go with an FHA loan?

I assure you there was no misunderstanding about the loan.

That's probably one of the main misunderstandings many people have when it comes to trainers, coaches, etc.    

A win-win would be providing her steady income of 2-3k per month and me renting at 4.5-5k (this is the number I've come up with due to market research, not actual rent).I probably do misunderstand TOD which is why I'm asking if there is a way to make this work so that 1.

Most of these “programs” rely on donations and or misunderstanding of time value of money.  

By openly sharing information and actively listening to each other, both parties can work together to reduce misunderstandings and conflicts.

Essentially, unless I am misunderstanding something, I’d have to sell the house in order to save money on taxes down the road.