Say your lender will allow up to $12,000 credit for non-recurring closing costs. So, to get the edge on a foreclosure property that you really like, you bump up the offer price accordingly and ask for the full $12,000 NRCC credit.

First of all, the offer price is only the offer price — the bank will look at all the terms and a $412,000 offer with $12,000K NRCC is still a $400,000 offer.

Secondly — aka the second problem — the home has to appraise. In some markets, that 3% difference is enough to cause a problem with the appraisal and make it necessary to adjust some numbers. That's one thing if you have that $12,000 in your pocket to bring in, but if you can't afford the down payment and closing costs combined, then you've shot yourself in the foot.