You just need to work with the lender and show that you can afford a down payment and the monthly payments. 

Then wait (2-3 month non-flood zone, 4-6 months flood zone) for approval.

Or do I only focus on the current mortgage payment?

Call all the auction companies in your area and get on their mailing listing (make a personal contract with auctioneer associates - let them know that you are a buyer)  they will email you a list of up-coming foreclosure auctions.Your benefit by getting to the owner early, is that you may be able to 1.take over the mortgage by making up the back payments 2. get a deed signed, 3. take over the existing mortgage 4. advise the owner how to delay or stop the mortgage foreclosure 5.

I  know that there are certain stipulations that come with the grant and I want to use  FHA  loans to keep my down payments low.

You want to invest just to have a place to live and potentially offsetting your mortgage payment by renting out the vacated rooms or having x amount of cashflow in the future?

Maxed out 3% credits, ~$2,500 on inspection items, rolled commission into down payment.

I am considering doing a creative financing agreement whereby I will sell my home to a buyer with a $20k non-refundable purchase option. 

Some lenders are Personal recourse / non-reported and some are business recourse fully reported.

@Justin Holley it all depends and there is a lot of flexibility.Our PMC is able to pay insurance & taxes for owners as well as utilitieis on vacant & MF properties.The only thing we shy away from is mortgage payments - too much potential liability if we pay late due to our error or owner portfolio doesn't have needed funds.Pretty much anything specifically related to a property should probably be paid via the Property LLC for easier accounting/tracking.