Mortgage $960 and the house is $3200 soft.

My first property I want to do a house hack duplex or triplex and use the rent coming in to cover mortgage plus a little cash flow.

I was pre approved for a mortgage about month ago and the bank quoted 4.625% on a 30 yr fixed.

I think you should start by looking at your strengths and weaknesses.If you like to fix things then flipping and landlording are the way to go.If you like numbers and aren't handy, then note investing and mortgages are the way to go.What I'm getting at is that you can amplify your success if you combine your real estate investing with something you're gifted at. 

I knew that it couldn’t pass for a loan, but the sellers are 3 months behind on mortgage payments and they’re getting divorced.

I doubt that company will be in business very long, so close that loan as fast as you can and take what you can get.True 100% financing is rare.If your credit is beat up, but your primary residence is good, you may want to look at house hacking with an FHA loan from a company like Carrington Mortgage. 

If you are planing on getting a mortgage to purchase most of these options would not be available for you.  

That seems incredibly low–does this mean that they've paid off the original mortgage to a point where they own 98.2% of the home?

If you are over $1mm, then I would call a few reputable commercial mortgage brokers. 

@Jacob Breazile - Make sure to account for the following expenses:1) Mortgage2) Mortgage insurance (PMI or MIP) or FHA Risk base3) Property Taxes4) City Taxes5) HOA (Home Owner’s Association) Dues and Fees and Assessments6) Insurance Property Hazard InsuranceFlood InsuranceEarthquake InsuranceUmbrella Insurance7) Vacancy Rate (usually 8% - the equivalent to one month a year, or 5-6% if multifamily and/or if experienced, if not use 8%)8) Utilities (you’ll have these if your tenant is not covering them and/or during vacancy) Water § Sewer § GarbageElectricityNatural GasPropane9) General Maintenance (usually 5%) Upkeep § LandscapingSnow removalRepairsNew Appliances10) Capital Expenditures (usually 5%, higher is the property is old and obsolete, less if fully rehabbed and all mechanicals and roof are new)11) Property Management (8%, even if you self manage, your time still has value and there might be a time when you'll want to be completely hands off or you'll not be able to do it, vacation, retirement, etc.)