At one point it was almost rented to my wife's sister and her now ex-husband.

If that's the case, and going into a judicial foreclosure, I can certainly see the borrower's attorney raising the issue as to redemptive rights and I'd say any judge would like grant the request, IMO.Your last paragraph isn't real clear, if they are using prearranged deed agreements, I don't care how big they are, not a good idea, in fact the bigger you are the more you'd better conform or accept the liability consequences.I'd prefer setting up a sister entity that would buy the property and then lease back, after a period to qualify, some inter office bookkeeping could take care of the financing, just make a new loan.

Brothers and sisters?

I have to imagine owning with your brothers and sister would qualify though, assuming other requirements are met. 

If my husband, sister & I want to buy a multi-family in San Antonio  & she lives in one unit full time and we live out of state, can we still qualify for owner occupied mortgage? 

I am looking at partnering with my sister with the goal of 1) helping her to buy a house in a the Bay Area 2) tax benefits and investment opportunity for myselfWe are looking at a couple of options - one is a house that shows up in the MLS “coming soon” - they are waiting on some windows to arrive (Covid supply chain problem?) 

and my sister was an escrow manager, so I KNOW THIS BUSINESS from childhood!

My sister and brother in-law live there and by all means its thriving compared to some of the other areas in Pittsburgh Metro.

My husband's sister has lived in the home with her 2 kids and boyfriend for about 7 years, just as long as my father in-law had owned it.

My husband's sister has lived in the home with her 2 kids and boyfriend for about 7 years, just as long as my father in-law had owned it.