FHA & Wrap Mortgage w/Second? (loan, pre-approved, score, finance)

[COresident]

Long story short, we've been dealing with a mortgage broker for over 3 months on a deal and things change weekly. Husband has a middle score of 650 and I'm self-employed, so I'm out. Existing home is in my name only. We are going the FHA route. Everything is pre-approved.

We are looking at buying a new home on a couple of acres that has been sitting vacant for almost 2 years. The appraisal just came back at $40k over what the contract price was, which is $548k. FHA loan limits for our county are $425k. That leaves a difference of $123k. Seller/Developer wants to give us a trade of $50k for our existing home, we were putting down $35k, and the developer was going to privately finance the remaining $38k. Everything was a "go" with the mortgage broker.

Two days before closing our broker says he found out that the $50k trade must be classified as a "seller concession", which is capped at 6% per FHA guidelines, and so he wanted the developer to tweak the numbers to make it all fit. Our big gripe is that we feel that the trade is not at all a concession.....it is simply a down payment which is coming from existing equity. The broker won't show us the actual regulation that defines what a "seller concession" is. Today, he suddenly claims that the $50k can't be used at all because any "seller concession" is limited to closing costs only (which are a whopping $16k) and that we need to just look at a conventional loan , pay way more in interest, not to mention the 20% down. Oh, and then he just learned that any second on an FHA is a huge no-no.

Does anyone have any experience with doing a wrag mortgage or equity trade on an FHA loan? Is it or is it not possible for the developer to carry a $38k second? And is there such a thing as an FHA jumbo loan in our area? The FHA website doesn't say much about "jumbos". Just some language about "high cost" areas. Any help/advice would be greatly appreaciated.