This allows me to focus on accusations and new development.

I don't want to run numerous checks and run the risk of being resented/accused of discrimination by an applicant who is not selected over $35. 

But be careful here, so you are not accused of discrimination.

I was wondering if anyone has encountered this and if the fact that he has to get the deposit from the VA is risky for us, and if so how do we turn them down without being accused of discrimination.

These are professionals and they know the laws and also if a tenant has an accusation of theft you can completely wash your hands of it as an eviction company handled the set out(Not you and 4 of your friends). 

By bending or giving on any of your written agreements and policies, you can be accused of offering un-fair treatment.  

After reading your post and those from others that make the accusation that this is being a slumlord, I understand the following to be true of your prospective tenant/buyer1.

When you start trying to "raise" money from private investors... there is the risk of being accused of issuing a security... which is a regulated activity .. and often may require compliance with both federal and state securities law.

A lawyer or two have in their own "sneaky" ways have more or less hinted that some how Month to Month rental agreements are not legal and accused me of not paying Bed taxes, but my rental properties are not in the most favored sections on town and get renters with histories that are not very desirable.

And I've been quite successful - all with great tenants who have lasted.I'll gladly tell you all about my screening process, but would rather not have it up for all to see - as some will accuse me of discriminating (read "good screening").