What would you do if you were in our shoes?

(I’m comfortable with the current mortgage amount)Anyways, there’s 3 options.1.

But you can comfortably be in the drivers seat.A lot of people threaten to sue, most don't. 

ability to comfortably rent out the basement for 1200 per month Lessons learned?

I would be comfortable paying $2,000/mo with Mortgage, PMI, Taxes, etc... 

With things growing, I really want to leave my 9-5 job to focus on my investing business.I currently live a pretty cheap lifestyle, so I only need about $30,000 annually to live very comfortably.

It depends on your financial comfort level. 

If you're not looking to sell your current home prior to buying a new one, lenders will look at your current DTI on both home mortgages, not on the future DTI when you already have a lease/tenant renting your current home.If your income cannot justify having two mortgages that lenders are comfortable with, you may have to explore other ways to do this.

We'd be happy to discuss terms to make the lender comfortable.

He agreed to step up and handle the closing for me and I was completely comfortable with him doing it since he had more experience with real estate investing than I do.