Will he and potential buyer of the property be subject to Commercial financing or will the property still qualify for residential 4 unit and under loan types/primary?

Quote from @Vince Scipione: Standard would be an FHA loan for your situation more than likely.

I have been helping investor close deals literally with less than $10,000 out of pocket using 100% Purchase/100% Rehab hard money loans to do BRRRRs.

Is there a pre existing loan with that bank with either of you?

I've helped people with SBA loans to purchase real estate for a business, but for buying rental real estate, the DSCR loan is a much better option.

We've utilized the VA loan for our current home, and this strategy has worked well so far.

If my spouse wasn’t opposed to moving I would try to buy a new house hack every 12-15 months and use low down payment owner occupied loans for as long as it made sense.

If you Bank/Lender does not allow it you can refinace the mortgage into a DSCR or true Portfolio loan program. 

Texas does have specific rules regarding home equity loans and cash-out refinancing (often referred to as "Texas Equity Section 50(a)(6)"), but these don’t prohibit homeowners from using funds for investment properties.

I know that interest on the acquisition loan can be included in the cost basis since it’s inventory.