The moral of the story is that response rates are unpredictable.

Moral of the story.....be willing to be creative in your approach to deals!

The good ones, that want to better their education, strive to provide a good service for their customers, and operate morally and ethically could never be compared to a "wholesaler" in my opinion. 

It doesn't look like you will be able to refinance in the near future so the scenario may look like this:  (Lose-Lose, his name is on a loan for a property that he doesn't have the deed to and you are morally and financially responsible for a property that may not be cash flowing very well). 

If I can (Legally, Morally, and Ethically) profit while helping people stay in their homes, or helping them get a fresh start, I will do my best to be active in this area.  

My predicament is we have a offer lower than we want.

To me it is not worth risking reputation, morals, etc. simply to get a deal.

Keep in mind things can happen, for example the value of the house could change in the meantime, messing with that ratio.Also, with an FHA loan the mortgage insurance is more expensive, and if I remember correctly it's FIVE years before you can apply to have it taken off.The moral of the story is just put down 20%.

I can't rent out the SFH home that I'm living in, I can if it's a duplex, thus the predicament.  

While legal, such a law flirts with the morality and helping others.