There are lots of avenues for funding but if you are starting out with the conventional residential products do some deeper research on what lender criteria are at the moment - understand their pain points. 

Most likely looking to buy/hold maybe renovate and refinance as I live there but trying to start with baby steps.1: FHA: told that sellers are not so enthused about this option and that my offer may go to the bottom of the pile if competing with multiple offers that are conventional.

Can your HML or conventional lender collect, take property back?

A conventional bank such as wells fargo may do 80 ltv at that time, I have a good local bank that does 75% ltv, title in my llc, and very competitive rates.

Once your score rebounds and underwriters see that you had a hiccup, but it's not habitual, you'll get conventional financing.  

Your second purchase will have to go conventional. 

I went to the bank to get pre approved for a conventional mortgage loan and got sent to the commercial loan dept.

Another multifamily using a conventional loan? 

The FHA loan is pretty limited in how much of a "fixer" you guys could purchase, I bet he could qualify for a conventional loan at 3% down which may increase your options (food for thought).As far as structure goes you two should sit down and discuss length of ownership, exit strategies, etc.

Will conventions come back?