Also, townhomes are a great bridge property, it's a common trend that those in townhomes are aspiring for home ownership meaning credit sensitive and with that right mindset. 

What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.?

The cons as i see it include loosing the 2 of 5 year cap gain exception, typically not an ideal rental because the emphasis at purchase was buying a good home for your family and not a rental with optimal return (my ex-home consistently has the lowest cash flow for equity in my RE portfolio), not disconnected enough from the property causes addition angst on damage and may result in over improvement.  

I could be misunderstanding how this deal was structured, but wouldn't the seller who is on the underlying mortgage have an incentive not to let it go into foreclosure since their credit is at stake?

--------------------------------------------------------------------------------------Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.Property Class will typically dictate the Class of tenant you get, which greatly IMPACTS rental income stability and property maintenance/damage by tenants.If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.If you buy/renovate a property in Class D area to Class A standards, what quality of tenant will you get?

Norada was basically borrowing and owing unsecured debt, like a revolving credit card debt.

In most of those cases, their broker took a high fee and the investor didn't end up with a great deal.Here are a couple of things that are a tipoff you are not working with a broker with your interests at heart (1) they want to pull your credit before having a conversation, or (2) they send you a long list of things you need to provide them before learning about you and your deal.The conversation should start with why you are interested in REI, then understanding your strategy to get there.

You can also send payments to credit card whenever you have spare money.

So far mostly people are telling me I'm probably stuck until their lease is over. meanwhile I also need to pay down my debt and improve credit score. 

@Geovanni Cano sellers don't like FHA, it is meant for people with little money and very low credit score, plus you have an FHA inspection which can derail a deal a week before closing, nothing the buyer can do.