I don't think you are going to be able to get insurance for two separate living units in a single-family when they are both illegal and likely do not have the correct egress windows (basement) for fire safety which could subject you to huge liability if something happens to either party.

There is statutory, and Fannie/Freddie guidelines, that explicitly exempt these transfers from being subject to the Due On Sale Clause...asset protection/estate planning purposes are covered.Why Use LLC when an Umbrella Policy Does the Same?

Maybe even offer to cover some closing costs to sweeten the deal if they’re stuck on a higher price.

You'll want the rents to at least cover the monthly principal, interest, taxes and insurance (and HOA if there is one).

There is statutory, and as you pointed out, now Fannie/Freddie guidelines, that exempt many transfers from being subject to the Due On Sale Clause...asset protection/estate planning purposes are covered.

 I'm not opposed to subject to, but my fear is whoever I am taking over the existing mortgage from will not continue making the payments.You make the payments.

What rentals are not subject to fair housing law?

Because there are nuances to seller financing, a lot of space would need to be devoted to covering the subject to make sense, and that requires sitting down to a cup of coffee for a long discussion.

Namely, that if a tenant (in this case accompanied by a whole family) ends up stop paying rent and I would be on the hook for both covering the mortgage and dealing with open ended legal costs and time.

Morby says something in his groups that isn’t covered here.