Things here in Boston can take a long time and I am looking at a process that could go anywhere from 30 days to 9 months depending on the inspector / board approves the initial application otherwise I would have to appeal.I am getting nervous on whether to move fwd with this deal or not.

This amount mainly covers the lender's application and underwriting fees.  

"According to BBVA Compass, the subject property must either be located in a low-to-moderate income census tract (as determined by the Federal Financial Institutions Examination Council) or the loan applicants cannot have an income greater than 80% of the median income for the area, per the guidelines"http://www.housingwire.com/articles/33120-bbva-compass-launches-zero-percent-down-mortgage-programSounds great for those who invested in low income housing areas don't think Los Angeles would have areas your friend would want to live in

It will report things like, this applicants past address is associated with multiple incidents of fraud etc.  

The money I used to purchase this was a hard money loan from a friend at applicable federal rate .28%.

Has any one using Bigger Pockets under the jurisdiction of Baton Rouge OCD or in Baker, Zachary or Central Louisiana,  ever made application for HOME program funding or funding from the Louisiana Housing Finance Agency?

depends, I always preferred drywall as opposed to paneling but if the paneling is over plaster and the plaster is in terrible condition removing the plaster and installing new drywall can be a nightmare you may have to rewire and replumb the whole house if you are getting inspections done, so take one room or even one wall at a time, if you feel at that point you can do the rest of the house then go for it, it's also an affordable thing to sub out, you should be able to pay someone $10 per sheet or less to hang and $10 a sheet or less to tape and spackle depending on how many sheets you need done, keep in mind a sheet of drywall cost around $10 a sheet also,  you can also remove the paneling and do a drywall venere which is a thin sheet of drywall over the plaster basically just like paneling except it's drywall.

Not disclosing source of funds is mortgage fraud, you can have funds on deposit for 6 months, but application, you are asked if any part of the down payment is borrowed.

In the one case I had, the only tool that was taken was a cordless drill that was duct-taped because it has cracked.

*E Myth contractor - Michael Gerber, Shorter, more applicable and more clear.