We were sitting at the closing table on the 180th day with the city and state approvals being faxed in. 

Lawyer, title company, maybe an appraisal, etc.The lender will have to approve your friend before the assumption could take place.If the current owners put 20% down, they're going to want that back at "sale."

However he only got pre-approval for 175,000 we did not approve jointly only he did.

QUESTION: What does the approval process look like when commission makes up about 15% of your income, and the rest is a base salary? 

They will approve houses there but because of issues they are extremely strict (to the point of being excessive) its one of the 3 highest crime streets in the entire zip.

Any lender that can advise us accordingly on how to get approved for a loan or are willing to work with us that would be greatly appreciated!

I recently got approved for a refi from the bank for another property worth no more than $400K.

Some potential problems in my opinion:- 2 tenants on the lease which complicates the agreement- May have overnight guests whom I would not want to stay- May sub-lease the extra bedroom to people who I do not approve of- If only one moves out, I cannot rent the whole house to a family.

How "bad" of a home can your financing handle (I am hoping you will have a mortgage pre-approval some simliar Proof of Funds)? 

The higher end flip market is soft and new first time home buyers are all maxing out on there pre-approvals.