Because I called him and HE ANSWERED ME (after my realtor tried multiple attempts of contacting him).What do i do?

Real estate attorney should have an answer or at least a good couple of suggestions for you.

The answer to your question is it all depends on what your goals are.

There are ALWAYS exceptions.That being said we have converted a one car garage into two more bedrooms on several occasions.So you answer lies in where do you see this property in ten years.

I'm a first time investor and would like to "house hack," so I can establish residence there and at least cover the mortgage with the other rooms.The real questions that I don't know how to answer are the due to the fact that I'm a 1099 and have been for years.

I think you haven't gotten many responses because the answer is "not many."

Of course the answer depends on if you can easily and comfortably afford it.

My guess is that the owner is just going to let this go on forever or until they're forced to do something about it.The attorney on our team is based in Huntington, I can connect you to him as he may have the best answer for you.Shoot me a PM if interested.Best of luck to you!

Jonathan, no offense to any of the other posters but their answers come from what would be considered “general in nature” since they are not local to your market and likely do not know the current market conditions of your area. 

Different than CA, however, @Brad Smith above gave a great answer and the settlement date should be the date of record for the FHA rule.