Inflated Sale Price on Reno Loan

[Coco Poyet]

Hi BP community - My husband and I received the latest loan estimate for a house that has a purchase price of $261k and total reno of $26k or $287k total. The lender is considering that the total due to the seller is $287K (purchase price + reno) while the actual price agreed with the seller was $261K. Is it common practice to inflate like that the amount due to the seller?  

Similarly, the lender considers that the total price due by the borrowers (aka us the two RE newbies) is the "sale price" (which is the purchase price + the reno) + the closing costs (16k) + the reno (again?) or $330K total. I raised the double counting of the reno to the lender and they said that there was a line that was a credit but that is not accurate. What is going on? 

This is supposed to be a reputable local lender so I find it hard to think that they would make that big of an error and hope people sign without reading every single line. 

Thanks in advance for any piece of advise.