I can borrow a very small amount from my 401(k) at 2.25% interest for a down payment or purchase, but given how hot my local market has been that won't get me very far until I can learn some alternative strategies.  

From down payment through months 1-9?

The buyer made payments for a few months, ran the business into the ground, and stopped paying.

They don't allow for mortgage payments, but you can have a rev mort because no payments are required.Medicaid will exempt a home (trust or not) if the client lives in it, or if the community spouse lives in it... but you also have to be able to afford to keep it.Cart before horse here with info and not enough details, let's PM.

With the FHA loan you will not need a really large down payment either so that is a plus! 

They haven't been late on any payments, but they are employees of his so if they don't pay he deducts it from their paycheck.

Many investors that use this strategy accept they are basically only having their mortgage payment paid by the tenants.It is a good strategy in order to get into the game.  

That way we wouldn't have a house payment. 

One last question, and again sorry for bombarding you at this time at night, so if I was to take out an FHA loan, the 3-5% down payment would fall under acquisition and the mortgage for the year would fall under the expenses right?

We didn't really have any saving to put toward a down payment on a house.