203(k) Loans

I turn to the BT community for some help:

*(We are planning to go talk to a lender who does 203(k)'s this week, just wanted to get some outside opinions.)

So we're doing a bit of house shopping and we came across a house that we like, but it is an unfinished foreclosure.  The contractor or someone was kind enough to leave 5 of the cabinets (all had been installed it appears).  So, we need a kitchen (cabinets, countertops, appliances), 3.5 baths (4 toilets, 4 vanities - showers are done aside from faucets), and some various trim and paint work from where stuff was ripped out, plus carpet in the bedrooms. 

Our original plan was to find a nice house, put 20% down, do a nice normal conventional loan and live happily ever after.  We can't do that with this one because it is obviously not liveable.  Our Realtor suggested we look into a 203(k).  She also suggested that since we were coming in w/20% down in the first place we do the 203(k) and upon completion refi the loan into a conventional 15 or 30 yr.  We are very nervous about only putting 3.5% down (recommended so we could qualify for the program), plus we had planned for payments based on a certain loan amount.  Now we are looking at the house price + $x to finish the place which jacks up our monthly payment more than we desired.  Granted, even in this market, the house is appraised and could easily be worth 100-150k more than we'd pay for it (custom home on 1+ac lot).  Not that it total matters as we'll be spending a LONG time in this house.

Anyone ever use the 203(k)?  Any Realtor types have an opinion? We may still find something we like better, but this has been our favorite so far.  And we can certainly afford the higher mortgage payment, but it would be tight for awhile.