The mortgage broker I spoke to said it could be done by doing a "Gift of Equity" since it's between father and son so I wouldn't need a down payment. 

The better option would be if someone gave you a gift of money! 

The best one was a tenant who actually was a gifted artist...I have a couple of his works....and was great as long as his dear Grandma was available to pay the rent.

Most of them, it's either a cash out refinance from some other property, gift from family (which could be that cash out refinance on Mom's San Jose home purchased 20 years ago at the 1998 price), lucky IPO (if you want $10m, it's actually really easy to do: build a time machine and go become one of the first 50 employees of Facebook), etc.

The problem with this is that the IRS will of course treat it as a gift.

Just want to be sure so the IRS doesnt view it as gift money@Will Barnard Thanks for the solid advice, really appreciate it.

My mom inherited the house from my grandpa and wants to gift her previous house to me.

If you gift her funds and also employ her that might be looked at more carefully.  

No problem.I am happy to pay in cash, check, wire transfer, Chilie's gift cards... for consistently used contractors you can even set up a local joint checking account, transfer it in, and let them scoop the money out. 

That being said it seems like a great way to get into building equity quick in a distressed property without resorting to hard money, large gifts, private loans, or big reserves of cash that take years of working to amass.