I actually just bought my first car a couple weeks ago, with a similar budget. Here is some stuff I learned during the process.
My suggestion is to take your time in looking for a car, unless you need it very soon. Have a list or something with the types of cars that would fit what you need, then check local classifieds or car listing services for those cars in your price range. It might take a while to get a car, but in the end you will end up with more car for the money. I got real lucky with the car I got.
Also you mentioned in the OP that you wanted an engine with d