Does the section 8 program provide any repair/replacement funds if house is trashed? 

A bit of rewording on your lease should cover you, but even with the current wording, it implies that the deposit is provided before the lease is signed"Roommate has to deliver to Landlord a deposit in the amount of seven hundred fifty dollars ($750) ("Initial Deposit") before move-in.

The policy provides a limit for the Existing building based on Actual Cash Value (depreciated value). 

Could you please provide suggestions?

Shan, I might know someone in the area who could provide the services you're requesting.

As a contractor I provide free estimates, simply email the prints in PDF and 7-10 business days later you'll get a professional bid.

However, it does not provide the same coverage as homeowners insurance, which provides financial protection in case of damage to personal property, disaster or accident such as fire damage or theft.  

Can you provide a few more details like Size, zoning, general area, etc? 

While I still suggest you get an Attorney to handle it, they can provide you with the Notice of Trustee Sale and a scrip to read at the Auction as these do no vary by countyYou can also go to the  Aransas County Clerk's office website or any other Texas county for that matter  and print a Notice and tailor it to your property. 

Unfortunately, this means that I have to let this deal go, but it made me come up with a couple of questions about this situation:Does anyone have experience in partnerships where one partner's only real requirement is to sit on the loan and potentially provide interest payments when needed during the duration of the construction?