Do the best you can with the numbers, have another investor look it over if need be, trust the numbers and then pull the trigger.

My question is, do lenders look only at the tax returns, or would they take the circumstances/HUD-1s into consideration when approving loans?

There is also considerable concern that these transactions could be reclassified as loans which would mean the transactions themselves would be violations of both civil and criminal law.So, does anyone still think that lease to own, or rent to own, or rent credit schemes are a good idea?

I have been looking buy my first home (Househack) for over a year and now I'm finally forced to pull the trigger because my job is requiring me to move, and I don't want to pay rent.

There are ways to transfer a property from personal name to LLC without triggering the due on sale clause in most mortgages, but you will want to look closely into the risks associated with that transfer. 

:) Pull the trigger!

What are the advantages and drawbacks of each managing type with special consideration regarding working with lenders for financing, with asset protection, and with privacy?

If there's no coverage for this type of damage under your policy, it certainly won't trigger any loss of use or loss of rents coverage either. 

You switched financing, which triggered a new inspection that resulted in necessary repairs.

There are serval things they take into consideration when it comes to getting pre-approved.