Many investors make the mistake of over-improving their purchases in Class C/D areas, which when damaged by Class C/D S8 tenants - costs them thousands.Another fallacy of S8 investing is that the S8 Caseworker will keep the S8 tenant inline by threatening to take their voucher away.- The reality is this depends on each individual caseworker.

My credit is poor right now but can easily be improved as my income is much better lately. 

I think they are just an extremely conservative bank and that is their interpretation of Fannie's guidelines.I have already gotten approved from some other banks (credit unions), so I'm not worried, but I am curious if anyone else has run into a bank telling them they need at least a 20% down payment on 3-4 units, regardless of it being FHA or not.

I don't accept credit card payments for this very reason.

Others tap into personal savings or use business lines of credit for more flexibility.

They do free sign up with 100 free credits so you can try them out.

The more lead credits you purchase at once the more you save.

Knoxville has some good ones like First Tennessee, Pinnacle Financial Partners, Y-12 Federal Credit Union.

Check with local credit unions.  

If you have good credit they don't ask for a deposit so it very easy.