In a similar vein, making a larger down payment (and thus lowering your monthly debt burden) may also compensate for a lower credit score.

Would have more than covered my compensation. 

You and your wife's employment and compensation is very similar to my husband and myself. 

In addition, I’d argue that they received substantial benefit (compensation) by getting the property at a discount by taking illegal actions.

If there was no Fannie Mae/Freddy Mac to buy the loans - most banks just do the servicing - interest rates would have to be vastly higher and more likely to be adjustable to compensate for inflation.

Your partner should receive adequate compensation for loaning the money and the potential risk of loss. 

However, It does still mean that my client can pull out without losing their EMD, and if there is a major repair needed, I can still request that repair or some compensation to the buyer for the repair.

(NOTE, this does NOT mean that, when something goes badly, that you shouldn't compensate them, im a firm believer in giving discounts when some sort of lame thing happens (e.g. hot tub craps out and guests cannot use something that they were seriously looking forward to, and things like this- but when they ask in their initial message "would you consider taking less" - absolutely never.

Cash reserves also include an owner's ability to borrow, getting to other sources of funds for emergencies and being able to carry short term debt.Multi, 5+ units are more to condition and net worth along with reserves and that is considering the debt coverage ratio, a minimum of 125%, better at 175% or more. 6 months PITI is still valid, that may well move out to 12 months as a compensating factor.Compensating factors are those aspects of the property, net worth, income and management experience that may out weigh a borrower's lacking in other areas.

Make sure you are compensated for this risk appropriately or don't do the loan.