NOTE; I think it is risky to buy any foreclosure given all the fraud. That is just the practicality - make sure you have clear title and even that won't guarantee anything if it turns out that the banks fraud actions keep titles unclear for past 50 years. On the ETHICAL side, while I once wanted to flip houses, I despise that anyone is benefitting from other people's problems... go find a short sale and help people prevent financial choas. If you are not buying as an investment then that could be another thing so the following is offered for those that are without choices financially. It is available for your primary residence.
A 203(K) loan can save that deal of a foreclosure » Knoxville News Sentinel: "That’s where the FHA 203(K) loan comes into play if you’re buying a primary residence. Because it’s an FHA loan, you have a low down payment and premium pricing available with only a 640 credit score. Typically, FHA’s standards regarding the condition of the property are pretty sound and unwavering. Did I mention you have to be able to actually live in the home and have running water and a working roof when you close? Well, FHA is extremely particular on these matters, ensuring its customers live in a safe, affordable home. That’s the focus of their business. FHA guidelines also limit loan size.
What makes a 203(K) loan special is it allows the buyer to make some of the necessary repairs or desired upgrades by financing the costs into one loan amount. The 203(K) loan will also work on a refinance, in case you want to bust out a wall and create a bigger closet. Whatever the need, this loan may be a solution."