ive got a potential seller with an existing mortgage left over of 190k an the home arv is abt 310k how would i go about my offer price formula with the existing mortgage? 

The most obvious is that you will be able to offset your mortgage with renting out a few rooms.

She estimated we could loan up to 500K on a mortgage with 5% down at a 6.8% interest rate. 

If you live in one unit and do the house hacking thing, your mortgage gets subsidized. 

So, they're clueless as to how much time is actually required to PROPERLY manage a rental.On the other hand, when something goes wrong and takes a LOT of time to address, owners expect the PMC to cover it for NO ADDitional cost:(So, PMCs (at least the ones that want to stay in business and make money) are forced to try to average everything out.BTW, what do YOU think the 8-10% covers?

I do all I can to ensure the properties are as safe and well maintained as possible, however, we obtained mortgages in our names.

Numbers don't pencil out for a 30 year mortgage, but property still sells! 

The best success I have had with seller financing is to listen first to the sellers problem before proposing a solution.Typically a seller finance transaction involves :1) Purchase & sale agreement2) Note3) Recorded deed of trust or mortgage depending on your state.

The house has a little mortgage that can be paid with the down payment. 

It seems the days of renting one side to cover your mortgage are gone.