Funny how things seem like common sense, only after they happened, isnt it?

I would be less worried about their qualifications in these scenarios and more worried about the down payment.

Become a Material Participant.We are given a clear framework for determining Material Participation (not passive) in Pub 925.There are 7 scenarios that will get you there.Material participation scenarios (Pub 925):1. 500 hours.2.

Illegal basement units seem to be very common in this area.

You're making a fairly common mistake of designing your castle when you haven't even learned how to build a chicken coop.

@Jordan Sachs I can not speak to PA but in MN, yes, I have seen similar scenarios play out. 

However, consider calling the VA’s regional loan center or speaking with a VA-approved lender who can interpret the rules in a more specific scenario tailored for you.

This is Occupancy Fraud, a very common type of mortgage fraud. 

Suman, like the all too common vast majority, is using incomplete math, and as is said "garbage in - garbage out". 

It may be possible to get away with 15% down instead of 20% depending on the scenario.