That is correct that the home must appraise with the sales price plus the CC. However, there really isn't anything to worry about as a seller. If it doesn't appraise then just have it in writing per the contract that the CC will be lessened, not the sales price. If it closes and there's any CC left on the table then it goes back in the seller's pocket.
Texas Realtor... However, these are government loans so the down payment and Closing Cost percentage is the same throughout the country. :)
in Hammonton, o: 609-294-4620 / m: 609-617-2144 / f: 609-294-4639
He'll give you complimentary guidance.
If the full 5% is not used for closing cost you can request the balance.
typically when a buyer asks for closing cost it is added to the agreed purchase price.