So as of right now my biggest issue is finding an established FHA lender who understands how the loan works and is effective in securing them. 

Contract based on appraisal of home which is 71kMarketing with social media outlets .

The tenant also had a GF that lived there, I see the new door is not securable anymore, do i have the right to secure my property from squatters?

As far as I can tell, the cash flow is minimal (even if it is good "for the area") ie. less than 1% gross per month is hardly worth putting up your own home as security for, IMHO.By the way, if you put up such a large (more than usual?) 

I'm need to pay off this hard money and secure a cheaper source of money.what are my options I make good verifiable  income but my scores are hovering around 600 what are my options? 

Can I propose a master lease option with the current owner if I can secure $15k down through private lending?

They currently live off Social Security and $3,000 in rental income, so I don't think they need/hunt for stock losses to claim.  

"I'm not sure whats left in this tape....see if you can find any value"....you know to expect a mixed bag of secured and unsecured, deeply underwater BK13, demolished, significant back taxes, tax sales etc etc.

I plan to give a refund of security deposit (less any damages) however I am unsure if I need to refund any portion of the actual rent or not?

Effect of seller's default on loan secured by mortgage or lien on property If, at any time prior to the expiration of the time period in which the option purchaser has a right to exercise the option...