But I understand where I’m at now, and am willing to work for free until I can provide such value.A little about me.

With the numbers you provided above, you will have to ensure you have healthy reserves.

Now the post test reveals I have pvc sewer line leaks under the concrete foundation. plumber has found multiple breaks in the line which need to be repaired and has provided an estimate for tunneling under the house and replacing entire 45ft main line!

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

Could you provide guidance on how to navigate this situation from both a tax and mortgage perspective so I won't have issues getting my next property?

In early Dec I offered to a few (4 or 5) newbies to provide financials and show them the last of the work. 

Each lender will be willing to provide a ballpark rate quote with some simple info such as FICO score, property type, location, term, and desired LTV.

Just based on the info you provided I would take the loss and move on.

And to top it off, the letter stated 'with capital up to $300,000' and found out from the SOW we provided to them for $65,000 in rehab fees, they were only giving us $40,000. 

This is from navigatehousing.com: "According to OMB’s guidance, any program that provides direct benefits to individuals is not subject to the federal funding pause.