Got a conventional 30yr fixed at 5%.

You can get a conventional or FHA loan but if you have to move quick to secure the property this could be an issue.

Based on your post you aren't going to get a conventional mortgage -credit and short term intent being the biggest two items.Look for hard or private money lenders that might be willing to work with your situation.

Assuming that you are purchasing a SFR as a buy and hold, and you're financing it with a conventional mortgage, would you even consider properties for which flood insurance will be required by the mortgage company?

I live in the bay area and notice that inventory is quite low here thus prices are way above my budget. 

Any other investment property you buy going forward using conventional financing you will have to put 20-25% down in today's market typically.

I just ran statistics for last month and the inventory is 30% below what it was at this time last year.  

@Linda Weygant With this approach, every newly purchased (and mortgaged) property is almost guaranteed to raise your total DTI ratio.Let's say the target max DTI for a conventional mortgage product is 40%.  

If Fannie Mae does pay the fines current than I could use my conventional lender.

At NWA we are trained to require that potential investors meet us in person before we start sending them our inventory.