I made a classic newbie/lazy mistake - I got a preapproval letter from one highly recommended mortgage broker, but then neglected to shop around.

@Leland Smith stop using rocket lawyer and use someone in town. 1,000 to send a letter is ludicrous. it should cost you 250 or less to write and send a letter. and 2k??

1) Do I write a letter to the seller explaining why I'm backing out of the contract?

All pretty much beginning with the letter M....down to about Vickey/Henderson.  

Purchase price, balloon, interest and down-payment.

My new proposal is $225,000 with no money down owner financing with a 10 year balloon.  

I plan on doing repetitive letters to the majority of the properties, but thought it would be best to call him.

And even another option is finding a hard money lender for the initial capital, but just make sure the numbers look right and that the short term loan is at least 12 months before the balloon payment AND you are sure that the refi is going to give you back enough cash to pay back the private lender.Your timeframe of refinancing after a year is the right call.  

The loan letter should contain the average loan closing time and the maximum amount you qualified for.  

Refinancing for 1.3mm. 16 unit residential These are the terms offered by Lender......3+3+3+3+3+3+3+3+3+3 ARM, 30yr Amortization- 3.625% 5+5+5+5+5+5 ARM, 30yr Amortization- 4.25% 10yr Balloon, 25yr Amortization- 5.375%Which one folks?