Correction to Scott, the seller is not paying 3% of closing costs, but 3% of purchase price towards closing costs. What I like to have the contract read is that the seller will pay "X" amount of dollars towards closing costs. Such as, purchase price is $300,000, seller will contribute $9,000 towards closing costs. These can definitely be used for points. Not sure about funding fee. It is desirable for a seller to pay to buy down your rate in points as it is a way for you to qualify. Also, as long as you pay your required minimum of 3.5% down on an FHA loan, the only way for you to be disqualified for the financing is if the purchase price is increased for any reason, not decreased. If there is an ammended contract that lowers the purchase price, your amount down will increase your percentage, not decrease it. Let's say I am using my scenario above, and you are putting down $10,500. Your closing costs come to less than $9,000, so you ammend the contract to reduce your price to, let's say $299,000, with only an $8,000 seller's concession. Your $10,500 can still be used, and you could lower your loan amount. The problem is that if this is discovered at the closing table, it would require additional underwriting and disclosures.