Felt like a fraud and I needed to overcome that.

If I recall correctly, dry funded double closes have been misidentified as mortgage fraud in the past thus leading to excessive concern.

The new unemployment data coincides with evidence that some newly laid-off Americans are facing delays in receiving unemployment benefits, with state agencies intensifying efforts to combat fraud.

You probably will fall through on this deal, banks generally don't look too kindly on 100% financing and he's probably going to leave out the seller financing part (mortgage fraud) to try and get the loan. 

Eric, The lenders are correct that if you are an occupying resident that you will get the lower rate, however lying regarding your intent to occupy is mortgage fraud. 

Sounds like a fraud to me. 

Have you been a victim of fraud?

There are ramifications for Federal and State tax fraud if you claim 100% of the expense. 

I have a Cleveland Single Family home that is almost identical to a property in Akron, and my property in Akron has appreciated steadily over 3% in the time I have had it, the house in Cleveland holds maybe a $10k increase in value in the same amount of time. 

As for the retrofitting plan, I can see how it can work but there's plenty of opportunity for shoddy workmanship and fraud in things like that.