A  few things you mention stand out.In no particular order:You probably know this but FHA loans only require 3.5% down, although you do get a very small .05% break in monthly mortgage insurance for putting down 5%. 

Hi,This is the first property I sell, so no idea what to do with the loan. Do I just pay off to the bank after I receive the payment from buyer? Other options? ThanksPilar

We're trying to determine if we should sell our current home or rent it out and what to look for in our next property in Rochester.More Info:We have a mortgage on a 3 bed/1 bath single family home that we got through an FHA loan.

The FHA will NOT give you a loan if you already have another mortgage within 100 miles so that's why you want to use an FHA Loan first.

Look for housing counseling agencies in your area and they will be able to give you information on any forgivable 2nd mortgages or grant programs that can help you with your down payment or closing costs and ask them if they have lenders that they work with.I've attached a fact sheet as an example of Freddie Mac's Home Possible program. 

Movement Mortgage in VA has informed me that they do 80% LTV and no seasoning.

Personally, I think the best thing you can do with a VA loan is to buy a 4 plex because if you play your numbers right (rental income vs. mortgage) you should be able to live rent-free at the very least and potentially cash flow right out of the gate.

I found out the max bid from the mortgage lawyer... it's well within budget... the house needs work but in a great neighborhood... so what else is of concern??? 

They needed more/ updated income as time passed and explanations of how ill be able to cover the cost of the mortgage, i also purchased a multifamily through the 203K. 

I was led to believe by the last mortgage person we used that we couldn't use the rental income for two years during conventional financing.