There's no question that you can and should collect a down payment, I recommend an absolute MINIMUM of the equivilent of 2 months payments, in addition to the first month's payment. But if you want to take the risk, you can lend them the down payment and have them pay it back monthly, but you said they can only afford up to $1,700 a month right? So that won't really work out too well.

The option money/down payment/deposit is ALWAYS non-refundable. It's the cost of buying. Ask your wife if the seller will give you your down payment back if you decide a year or two down the road that you're going to give your house back to the bank?

Your RTO doesn't have to run exactly to the end of your mortgage. I assume this is a 5 year mortgage we're talking about? Read your mortgage agreement carefully, you can usually refinance/pay it off in the 5th or even 4th year without penalty.

Like I said, I don't do leases anymore because I don't want to be tied down with the TPA, and I don't want my BUYERS to feel like tenants. I have just one purchase agreement.