Any income you show after repairs, depreciation and mortgage interest is taxed at your income bracket at the personal level.

They said they could lend the lower of 90% by the purchase price or 85% of appraisal value. 85% of appraisal value is approx 4K less than 90% of purchase price, so now I have to make up the difference. 

Granted that was a bubble but is it unreasonable to assume that they "should" get back to at least those levels in the next couple years?

Then you have a fun job of shimming the studs to the right level.

Instead of the seller paying her commission, it could be used to lower the price or used as part of the down payment.

However, I've already been told by conventional lenders that I am not likely to qualify since I'm self-employed, thus my income on paper is lower than normal.

I keep my rent a little lower than market and have several tenants that have stayed multiple years.  18 years renting and I have had a 8 year and 5 year tenant.

Recording fees4500 buyers agent commissions 500 warrantyprobably more I am forgetting to write down ...is there anyway to lower my closing costs ?

My experience has been that brokerages are mostly made up of a bunch of independent agents who all have their own approaches and investment level in their business.

Instead, focus on the most optimal use of your money that fits within your comfort level.