Maybe if we did a large enough down payment we could still get a loan, based on my husbands income (which fluctuates) and our other rental income?  

I cannot argue with a straight face that the market value fluctuates monthly and equates the actual monthly collection.The overall idea of using an S-corp to control SE tax is valid, but it needs to be implemented differently. 

Most HELOC's interest-rate is tied to prime and will fluctuate when the Fed raises rates. 

I say wait a year or so because with children, expenses fluctuate and I would want you to wait at least a year to see how good of a management you have over the finances before taking on the landlord endeavor.

HELOC interest rates fluctuate and most HELOCs have a balloon date.  

Some years can cost more more than other, thus, the expenses that are passed onto the Tenant fluctuate accordingly.

If you did this and either held it for a year (I️ believe that is the standard, but I️ would confirm with the banking institutions you want to go with), you could then refinance, pay off your land contract and pull cash out if appraisal came back higher.Your original thought process is correct in that a bank wants the 20% (I’ve seen closer to 25-30% on commercial loans until you build relationship) to protect themselves from fluctuations in value, but they also want skin in the game.Good luck,Roger

Like a 10-20% fluctuation just in case of surprises?

Some places are sensitive to fluctuations due to local circumstances. 

I know I don't make a ton on it in Ally but it keeps it liquid and my money doesn't fluctuate.