As others have mentioned, because this property is non-conforming (not the norm for the area) there may be troubles finding comps for appraisal purposes. 

I'm a CPA by trade, so I'm very conformable with numbers and modeling. 

If you go straight into a Fannie-Mae conforming loan when you buy, then typically you will have to put either 20% or 25% down. 

Since they would be unable to conform with contract specifications to inspect vacant property five days prior to close, buyer attempted to tie monetary consequences to late closing which would cover buyers rate lock.  

However, our process is too selective to retroactively select conforming properties.

They actually get penalized for good business decisions and rewarded for bad ones just as long as they conform to the rules.For example, I know of bankers who got huge bonuses before the collapse that approved loans that the numbers told them would default because they were rewarded for just writing loans, not writing good ones. 

I  would search for rental property located  west of highway 87 and  be very careful of older, often non conforming property in downtown San Jose. 

I would consider hiring an appraiser that appraises for 203k and other renovation financing, and have him appraise it based on anticipated future value (this is how they ALREADY do renovation appraisals, so you're getting someone that knows how) for TWO reasons:1) So you know what you're going to get out of this at the other end of the tunnel in terms of value.2) I'd ask him to comment specifically on zoning stuff, and if the property will conform to fannie, freddie, fha, and VA guidelines.

The conforming market only does deals inside of their box.  

So to keep it a conforming, non jumbo loan, and avoid PMI I have one 30 year loan for the conforming amount minus the down payment and a HELOC loan to cover the balance.