She owes what she owes and the bank isn't going to give a discount unless she defaults, which she won't.

While I never plan to default - EVER, we know there is risk with any leverage structure.  

So by default you're not going to get the best deals.  

Without knowing if there was a personal guarantee, collateral, or other compensation in case of default I hesitate to agree with you or the previous responses that the lender took ALL the risk.

Something about it being in the Midwest comes to mind.Some will argue that you want a clause in the option contract stating what happens if there is a default.

My biggest hurdle is getting over the "fear" of default or it's some kind of scam.

The repayment terms for a 401k participant loan are equal monthly/quarterly payments of principal and interest (typically prime plus 1%) over a 5 year term (longer if used to acquire your principal residence).Please note that if you take a full $50,000 and then pay back the loan, you can't take another $50,000 until 12 months after the first loan was fully paid back.Per the loan offset rules that went into effect with the 2018 Tax and Job Act: if you leave your job and the loan is current at the time you leave your job but then the loan goes into default because you left your job, you will have until your tax return deadline (including any timely filed extension) to make the loan current by depositing the outstanding balance into an IRA (and thereby avoid the taxes and penalties that would otherwise apply).

Talk to the lawyer so they can add wording should your partner default on the mortgage. 

The worst case scenario is the person defaults on the payments, you take back the house, and it's in terrible condition.

I like to think of location grades as a kind of risk score similar to what a FICO score or bond rating is to a consumers creditworthiness or bond default risk.