Cheers to you!
If your lender agrees to it, and the seller agrees to it, and you agree to it, then I would think it would be ok.
There is nothing in FHA regulations, that I am aware of, to prevent it. But check with your lender to be sure. Your lender should also inform you what they would require appraisal wise (recertification, reconsideration, or new appraisal) depending on the conversion, needed corrections, and what effect it may have on the property (gross livable area, appraised value and choice of comparables) after correction.
I have seen corrections for illegal, or unpermitted, conversions/additions as simple as building inspector approval (meet building codes) to complete removal to restore the property to its original condition.
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