The general public is protected.Also without a more experienced Co-Sponsor on a deal, a 1st timer will have a hard time qualifying for a Fannie Mae Loan which is used a lot on Syndications.There is always risk in this business, nothing is guaranteed.

I know I can qualify for that loan if I had the down payment support for option a, the 3.5 percent down by fha or some other means being the 10 percent down.

@Allen Li a good lender should be using all of that rental income to help you qualify. 

I hope that I can use these skills to help the people that I gain guidance from in the future. 

When I have put others up for rent in Spring or summer I have qualified tenants ready to move in within days, sometimes before renovations are complete!

Another option is to consider some form of seller/creative financing if you're not having much luck qualify for a commercial loan. 

People don’t sue people that qualify for food stamps.

But he works under the table and has little income and would no longer qualify for a loan. 

My understanding is it’s best to set up an LLC but we would not qualify for a mortgage as an LLC.

I don’t know your skill level or knowledge level to say should you do it or not, only you can figure that out but imo walk away and find another house.