This obviously was a huge surprise to us, and we now want to explore other options with other lenders.

In our local market many areas have extremely limited options for rental properties and units priced appropriately are typically filled quickly.

A lot of NNN lease locations were signed decades ago with 10% bumps every 5 years so as long as they keep renewing their options and if their sales are steady both the landlord and tenant will be fine. 

Fixing the home up first, then using a HELOC or refinancing would give more options for your next investment as you will have more capital.

Seller carry is not an option due to the home being in pre foreclosure.

For the refinance you might want to consider options other than hard money. 

So in your examples the first option would be commensurate with what we typically expect if I am understanding correctly.  

You didn't say what your credit was, but if this is your option based on credit, it might serve you to wait a few months until your credit is at least 660 where you have MUCH lower costs available to you.

I know their might  be some predatory practices out there and I don’t want be involved in any of that but I think there might be some options where we could make a fair deal with some one going throgh a tough time like this.

That way my current house won't be counted.It seems #3 is the only viable option but I am not sure if the mortgage broker is right or not.