I am a purchaser for a contract for deed, the contract says that I have to have financing after 3 years, my problem is that I was approved for an FHA loan, but I found out that the house would not appraise for the balance of my loan meaning I would have to put another 20k down on top of the 7k I have already put down. I want out of the contract, I realize I will lose the 7k but can the seller take me to court or can I be held responsible for the balance of the 3 years.. It does state that if I default that all payments would be considered rent.

It depends on the terms of the contract. It might allow him to hold you for the balance, but usually you will only be responsible for rent until you move out after sufficient notice.

Correct, I would hope or assume you had an attorney review the contract, if not, you need to now.

But I agree all of the ones I do, all merely revert to rent once you default. You will have to notify the seller of your intent to default and inform them of the date you plan to move from the home.