But I’m not dumb, and I don’t want to pay an extra $900 for something I can manage myself. 

I have the architectural and engineering plans already paid for and was looking to get the permits to start building.

If you've got enough damage to bring the price down that low, then it is a major job, and the permitting/paperwork/inspections needed to get it back up and running could be the biggest hurtle. 

I would have no problem to add the extra cash if they dont want to negotiate, and if I feel like I really want the house.2) i see in this website people hoping that the houses they are trying to buy appraise at the offered price.

Yes, through my Mortgage Broker sources, consisting of Banks and Mortgage Lenders, are offering I/O payment options as well as Hard Money sources.The Stated Income ALT loan programs for Florida are offering the I/O payment options as well.And to those who turn their nose up at I/O loans, when is the last time you made an extra payment on your Non-tax deductible car loan?

Rentals are permitted.

However, I mostly only purchase complete gut rehabs anyway so its not THAT much extra work for me. 

If you have a good real estate agent/lender/or maybe even lawyer that can fight for you they might be able to reduce some extra fees.Also, most likely the lawyer isnt selling insurance they have a relationship with a title rep and they send people to their insurance company when they can.

The extra months on top of the 12 months up front is for "cushion" because you are not going to make your mortgage payment typically until the 2nd month after closing, so your escrow account will not be replenished for those two months you are not making a payment.

It’s well worth the extra VA funding fee to me.Don’t forget to include these monthly expenses in your calculations: capital expenditures, vacancy, management.