My question is other than tax documents and insurance, what other notifications will the lender receive?  

Make sure you get every single bit of documentation needed from the homeowner to submit your package.  

My husband thinks we do not need to have them sign a formal month to month lease, but I prefer to have all steps documented.  

I have a ton of notes organized in a giant word document.  

A documents attorney and a fightin' attorney.  

I will document my experience as I go.

Just to clarify,  the seller never actually provided us any use or certificate of occupancy documents for the property.

It looks like your county recorder uses a third party service for title documents which will be spendy if you don't need it for heavy use  So you will have to contact the recorder directly or find a title company that can help you with this.The other free way to quickly check is through your state's GIS department which has an online parcel map.  

Let me know if you have any questions. http://homeguides.sfgate.com/documentation-needed-...

I'm sorry you're dealing with this.Your first step is to document what has happened up to now.Your second step is to return the security deposit OR send an accounting of how you spent it and return anything left over within 30 days.This part is very important.