-They are now requiring a 25% DP and a non-inhabitant co-signer for the loan, where 2 weeks ago, they had entertained a 3% DP. 

Rather, as your landlord I require you to keep the unit in habitable condition free of pests and hazards.

The other Con is these were inhabited by an elderly person on a fixed budget, so there is a ton of deferred maintenance.  

They will be inhabitable for the foreseeable future.What is the protocol with tenants?

For SFH owner inhabited home.  

Inhabiting the smaller unit, renting out the larger.

If not, it's inhabitable, codes can condemn the building. 

Based on what came back on the home inspection reports, we estimated around ~10k would be enough to take care of the bare minimum to get the house in habitable conditions and up to code and all.

To purchase a personal residence that my family and I could improve while inhabiting for approximately two years, make improvements too, and then sale for a profit.

The best way to structure this is to inhabit one room, rent out the rest, then you could get first time homebuyer preferential rates and financing. it would be better for just one of you to be on the loan.lenders chime in here!