FHA 203K loan, that's the answer. Talk to your lender and if they are not familiar with this product, find a different lender. The FHA 203K loan allows you to purchase both the home and finance the needed repairs and renovations. It's a fabulous vehicle for people looking to do what you are doing, buying a house that needs work and building a little 'sweat equity'. You've made a good decision. Good Luck!
FHA 203K loans have several restrictions. Can you tell me the price of the property? Do you have a contract ... have you even agreed on a deal? Is this a home to be auctioned (if so, it must be a cash sale)? Do you have a sufficient down payment? Purchasing a foreclosure is not the slam-dunk many people believe it to be, and often isn't a bargain at all. Proceed with caution. If I may be of further assistance, please contact me. Best of luck.
If the foreclosure is from a bank, they might finance it. Typically a home in poor shape will not pass FHA/VA inspections for safety. Most lenders will not work with you as the home might not pass their inspections for appraisal purposes.
I would bet they are looking for a cash sale. If it has been sitting there awhile, give them a cash offer...even if it is very small. You never know what they might take.