Help: We are First time home buyers!? No family to give us advice.?

I need some perspective here.
History: We are 1st buyers= no experience.
We have been renting a parsonage house from my husbands employers for 400 a month- large house, 100+ years old- issues with mold and structure are going to cost the Church (my husbands employer) about 4300 dollars AND A LOT more money to fix up this house right… ( not just patch it up) It is a money pit so they want to tear it down…I completely understand that.
They have asked us to relocate- Since there are NO houses for rent in our price range- we have to buy a home….
They have decided to give us the money that was estimated to fix the mold (4300) and have raised my husbands pay 200 dollars a month… All that is great. However- I am 7 months pregnant, and we STILL have a very limited price range to buy a house… 70-100K
We were given an estimate that our mortgage payment with tax and insurance included will be 670 a month which is pretty much as high as we can go a month since we have a toddler and are expecting a baby in Oct.

The major problem is: we are probably only going to be living in this town for another 5-7 years until my husband can go to graduate school- so being able to resell the house is a priority. Location is a key issue for us. We live in a town that has old run down houses right next to nice sub divisions -the “good” neighborhoods are WAY out of our range,so finding a good house in a resalable location is difficult in our price range.

We’ve looked at houses at the low and high end of our price range and as it turns out- we are on the edge of all the good houses- and on the tale end of all the crappy houses (that will need WAY MORE WORK *costly*- than we can afford either financially or time wise- as we will have 2 small children).

SO here is the QUESTION:
Should we go for the top of our budget to have a nicer home but be close to, if not totally “house poor” – but not have to do as much fixing up and have a better chance at resale…OR…should we aim at lower priced homes, get a house that needs more work -in a more questionable location, do what we can afford within the 5-7 years and hope for the best?

I know this is long, but I am desperate for help and we are running out of time… We are working with a USDA loan and a guy who is known for closing in 3 weeks… So I do think it is possible to get into the house before I have the baby. However, I know that may not happen- either way we don’t want to get locked into a house that we can’t sell, or end up not being able to afford our children.
Another reason for the Rush is the mold issue- it has started to affect our health.
Commuting is NOT an option- the nature of my husbands job ( facilities supervisor ) requires that he be available to the church sometimes even in the middle of the night.
Since we aren’t financial stable- GAS is an issue to consider as well.
We pay 400 for this house because it is old and because the church owns it and my husband works for the church… There are NO 3 bedrooms for rent in town and a 2 bedroom is more than a house payment would be. OBVIOUSLY THIS IS NOT AN IDEAL SITUATION.

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