Not to mention the amount of damage a dog does to the inside of the house.  

Your $10K down-payment also needs to be reflected in the Lease-Option Contract as being credited towards the $125K purchase price.

One guy has a great credit score, but recebtly lost his job after 12 years with his company.

Any private lenders out there that can do something like this?

I've read a number of threads with a lot of pros and cons to both but several threads mentioned they ended up with 5 yr term etc .. rather than a 30 year term.We have a great local credit union to work with that is easy to work with and has great rates.

What insuance agency will insure a new purchase if the bathroom needs to be remodeled due to water damage?

You will be amazed at the sort of damage they do and wonder how it was even possible.

Dropping the whole "friend" shtick :PThe property has a number of issues and a long history of code violations due to unrepaired tree damage. 

The buyers inspectors literally praised the work we had done throughout, but a week ago the CL-100 wood infestation inspection came back noting a small bit of non-structural exterior sheathing damage along the bottom of the back wall behind the vinyl siding due to moisture :( The good news is we are 99.9% sure the issue was caused by rain water coming off of the roof and landing in an area that had standing water before we brought in some dirt and gravel to resolve the drainage issue during the remodel (townhouse is on a slab). 

I even tried withdrawing some credit from the Bank of Mom, but alas, the bank was tapped out and the best I could muster was about $2,000.