They know we're serious about late fee enforcement.

Although you can completely finance the deal (0% down), you will still need some money for closing costs and/or the funding fee.

I don’t take application fees until I have reviewed an application and proceed to step 2, the background check. 

Most likely because of their attractive flat fees!

The only other option I see is cashing out the 403b and paying income tax and 10% early withdrawal fee (I’ m 32).

You will not see $1.3M you will only clear the difference of that 25% ($325K) minus taxes, Seller/Buyer fee's, attorney fee's might leave you with $180k amount split 2 ways so $90K each.You could take out a Heloc and pay him to walk away from the home so you can turn it into your home plus rental.

I once paid a $53,000 assignment fee; I can say, it was extremely upset when I got to the closing table, but even with that $53,000 assignment fee, I will still buying at at .40 on the dollar.

Is there a limit on what you can charge as an application fee?  

However, the one constant in these emails is a request for the broker fee co-op and determining the offered co-op fee seems to be the motivation behind these emails.

Look for loans with lower prepayment fees if you refinance or sell early.On an 8plex, a local / regional bank or credit union may have favorable terms with rates, term and fees.