The first question is, can I use a second home mortgage (10% down and lower interest rate) for this. 

I am assuming I should only apply for one loan approval since pulling my credit score/history will lower my credit number. 

The paid off property is an attractive and way lower risk / less work investment from my seat.

You'll then see that delinquency rates are:- At their lowest point since 2006- Historically on the low side of normal - On an overall downward trend for the past 4 yearsIn fact, excluding the artificially propped-up mortgage market of 2004-2006 during which delinquency rates were slightly lower than they are today, bottoming out at 1.41% in 2005, there are fewer mortgage delinquencies today than at any time in the past 33 years.By the way, when these scant 1.73% of homeowners become delinquent on their mortgages, they overwhelmingly have the equity to be able to sell the home at a gain if needed.

Getting it under market value would be a bonus.So, would using an FHA 203k renovation loan, which would allow me to buy something unqualified for a standard mortgage, which would weed out a lot of competition and push the price lower.

Basically, you're saying your intent is not to move in, but with owner-occupant loans for lower downpayments, you will sign a statement certifying your intent is to occupy the property. 

page=LoadVirtualDoc&BookmarkID=6536) that capped annual increases to the Taxable Value of a property to the lower of 5% or Michigan's Cost of Living increase.

Make sure you are sold on the particular project to get a level of comfort.Past projects might have been A to B areas where upside was greater and risk was lower.

Lowers the value of everything.

It's not a real common concept here in DFW area, but I love it.Buyers have no downtime, no rent rate risk, lower vacancy risk, potentially instant cash flow day 1.