FHA requieres 100 feet from rail road or electrical towers, from the living area not the lot size.

I think they can rebuild the back half of the house, but it would need all new electrical, plumbing etc as that was all in the back half of the house.

I called and explained how I was going to do this including electrical.

I find that the cheapest things to do that make the house go that extra mile are:Curb appeal of coursePainted cabinets and maybe new knobsPainted doors and new handlesnew carpet/hardwood or just very cleannew electrical switch platespaint or replace trimtile in foyer or just nice flooringnew shower curtains or clean sliding doorsadd window shutters painted an offset color of the housenice mailboxto expand on curb appeal:clean gutterspressure wash or clean sidingLandscaping is almost a must to sell really fastexterior lightsThese are just a few and are very basic items that can add to that WOW factor.

I got a new bathroom framed in, electrical is all set, I now need to rough in the plumbing, move some radiators around...etc..to be able to continue.

If you dont know how to do electrical work, LEARN LEARN LEARN!!

What type of furnace is it (gas,oil,electric)?

Is installing electric baseboard heat with separate thermostats an option?

Electrical work without a license is risky - your insurance may not cover a fire if its known that unlicensed work was performed; and YES, they do investigate that because its a way to reject your claim. 

Here is what the program allows to be fixed.Roofs, gutters and downspouts (no added value)HVAC, Plumbing & Electrical ( add 50% cost to value)Disabled person’s accessibility improvements (no added value)Lead-based paint stabilization (no added value)Mold abatement/termite repairs (no added value)Asbestos removal (must be done by a licensed asbestos expert) (nominal value)Basement finishing/remodeling (non-structural only) 20% of cost to valueSeptic system/well repair (no added value)Flooring (not including subfloor which is considered structural) (50% of cost to value) Kitchen/bathroom remodels (50% of cost to value)Painting (20% of cost to value)Weatherization (no added value but new windows adds 20%)Appliance purchase and install (50% of cost to value)Landscaping (70% of cost to value if fencing or front yard)Will he have equity to refinance in six months to do this in December 2021, probably not a sustainable plan.