I can foresee no situation in which our government will apply fiscal responsibility which means physical assets will likely be the best bet for quite a while. 

So I am looking to buy a house in a year, I have a 681 credit score but I want it to be in the 700 when I apply for the loan.

It's hard to argue the margins you point out if they could apply in my market. 

I believe banks will allow you to apply 75% of the rent income towards your personal income which should help with the debt-to-income.

Hard to tell what you're asking but I think what you're asking is general loan questions and doesn't really apply to STR in particular.

This approach was applied during and after the great recession of 2008, and it helped make many deals work.

However, when they applied three years ago, they showed me bank statements showing VERY substantial savings. 

They’re entitled to apply their same screening standards and wait for a tenant who meets their qualifications.Once they find a qualified tenant, and that tenant starts paying rent, then at that point your brother-in-law would no longer be responsible for paying rent.

Is the process for applying for refinancing different from applying for a mortgage to initially buy a property?

In most commercial loans, the guarantee applies based on a "bad boy clause" - which would mean some sort of criminal activity.