If you have a pre-approval from Paul, your financing will not fall through.

So if you got approved for a 200K line, you can pull 65K at closing to pay off all the debt in your wife's name.

Stop seeking approval or validation from others, especially your tenant.

After you review and approve you can fund escrow and the title company will handle the rest.

Once your application is approved, you will have 24 hours to submit a non-refundable binder payment for your rental unit.

Is it a requirement to pay off all collection accounts or charge offs from years ago to get approved for a mortgage.

My understanding is that if it's a local "Durham" historical district then it's a big pain with most exterior changes needing approval. 

Last week was tough because I bought the property under the numbers and assumptions the prior contractor had quoted me and were approved by my lender.

As others have said, there are cheaper, code-approved ways to accomplish your goal via GFCIs or single point bonding. 

Your broker may have forgotten, but when the appraiser reports back to the lender that it is a rooming house, the lender will walk away or only underwrite an LTV of 50-65%.Your best bet is either a private lender or finding a conventional lender which uses auto-approval software (TD is an example) and mortgage agent/broker who can steer you towards an application that qualifies for auto-approval (if at all possible).When we were first in the same situation, we approached a family member with a proposal to have their name on title and live in the house (rent and utilities free) in exchange for their serving as the Den Mother to keep the house in order.