I agree with you that everyone on the MLS is looking to sell retail, but that doesn't always work out for them.

I would suggest you try to work out financing either with the bank via FHA (since you mentioned this) or with your seller for 30 years or more, with NO PRE-PAYMENT PENALTY! 

I could probably do it, but I don’t have the contractors that I trust in my back pocket, so it probably wouldn’t work out great for me.

However, if you move in and it doesn't work out with this people (and it will NOT work out - you can already intuitively see the writing on the wall despite your being new) it will be a lot more difficult on you and your family - not just emotionally, but financially - as these kinds of people don't always go quietly.I think @Jay Hinrichs idea is brilliant - just explain that the only way you could get financing in your situation is to receive the other unit vacant to do "necessary renovations" at the recommendation of the bank's inspector. 

But the terms are really set by the individual bank and are negotiable to some extent.If you have a good rental history and can form a relationship with a local bank it could work out well. 

Should work out nice at that price in.

How did it work out for you?

George is these do not work out, I may reach out to for your help.  

Try smaller banks usaully can work out some kinda deal for your business.

@Jason DiClementeIn theory my renters will actually be the ones paying it off and putting money in my pockets if the numbers work out right!