Yes. It's called a FHA 203(k) loan. This loan will allow you to borrow the actual purchase price and the amount needed to rehab the property. It's almost identical to a FHA loan, but with a 203(k) you're required to hire a licensed & insured contractor, and depending on the type work and/or the cost of the rehab, you might even need a 203(k) HUD consultant. This HUD consultant overlooks the contractor's estimate and also inspects the property. This can easily cost you several hundred dollars in additional fees.
Generally in a short sale, I work on getting a commitment so that by the time the short sale is approved, you're ready to close and avoid having to request extensions, which most times kills your deal. When doing a 203(k) it's even more critical to work on obtaining a commitment while the short sale is being negotiated, just because so many more time consuming issues can arise with a 203(k) loan.
Right after closing, funds for the rehab are disbursed to you and your contractor, who can begin the work. There are so many details involved that your best move is to meet face-to-face with a loan officer who has this loan program available, go over everything step by step, and go from there.
Feel free to contact me with any questions. Good luck!
Senior Loan Officer
Sterling National Bank