If you are looking to pull more cash out I'd go with the second option.

With that being said you do have lots of options.

Explore strategies like house hacking or creative financing options, such as DSCR loans, to make the most of your leverage.

If they encounter difficulties, they can consider Delaware Statutory Trusts (DSTs) as a backup option.

I thought a FHA loan would be the best option but now I am second guessing my choice since interests rates might be higher.

Quote from @Bruce Woodruff: I agree with having multiple options.

The Meter Save program was discontinued in Chicago in 2022 and it seems there are no viable options that I qualify for (I’ve looked at the department of waters options and I don’t fit the qualifications).this feels like I’m getting ripped off each month in the bill and am really needing support here.

If you would like I can also have someone from our team reach out to just give her some options.  

As Guadalupe said above, a DSCR is a great option for buying with a lower DP but it comes with the caveat of higher interest rates; and as Nate said, National Bank of Coxsackie in Glenmont is a great local bank which wont sell your note to larger banks.

If you're both in and this is your best option, go for it.On the other hand, looking into multifamily buy & hold properties could yield similar results with less hassle.