Wanting to buy REO to live in

Hey Guys 

I need some very experienced advice. My wife and I are leasing our home right now but we have found a great deal on a Foreclosure (HUD). The house is nice with a few cosmetic issues. However we would like to do a major rehab; hardwood , add island in kitchen, expand bedrooms, expand shower so on and so forth. We feel that with a major rehab and all the cost will still have a 100k in equity

So my questions are:

1. Is this even a good idea? Loaning for 20k more that our offer price to rehab

2.  With Not having warranty and all the other normal purchase protection what are rehab expectancies? 

3. How I should proceed knowing that anything could be wrong? What are the rehab/ business Priorities that should be looked into before we feel that we have a solid purchase.

4.  Can contractors see before we make and offer?

Thanks