Real estate is no place for amateurs.The lender added some substantial pre-paids, and he ended up covering $16K in closing costs. 

In NC 2 months rent is the maximum I can take as a security deposit and if he moves out early i would be legally obligated to return the prepaid rent.

Obviously you can back out some of that like pre paid insurance etc and I would want that done.

A little better, but that's a decent chunk of cash to put down on a property and you still have closing costs, prepaids, and any repairs that need to be done sooner rather than later.Of course if you're going to live in the property there are some more favorable conventional financing terms available out there right now and even better portfolio products from local banks requiring low down payments, low interest rates, and no PMI if you qualify.

If you have any tenants that don't have a bank account we have also partnered with NetSpend where they can use the NetSpend prepaid card like a bank account on our system.  

Here's my quick desktop analysis (it is a guestimate):170k Purchase Price * 20% (Down Payment) = 34k + ~4k (3% for estimated closing costs & prepaids)=~$38k total acquisition cost.That leaves 136k (principal balance) @ 5.5% for 30 years with a payment of 772 Principal & Interest, plus ~300 (?)

Don't forget about approx 5% in closing costs and prepaids for tax and insurance.

Loan Type: Cash-Out RefinanceNumber of Properties in Loan: 4Interest Rate: 4.75% FixedPoints Pre-Paid: 0.5%Term: 10 yearsAmortization: 20 yearsLTV: 70%Closing Costs: $1,000 each plus $350 for appraisal.

I pay pre-paids at closing.

In other words, the developer is responsible for contributing at least 20% of the total cost of the project - usually in the form of free-and-clear and entitled land, with most of the architectural and engineering costs prepaid for by the developer.