Trouble with down payment and closing costs

[Jordan Johnson]

My fiancé and I are buying our first house that will be our primary residence for a couple years then we will rent it. We negotiated with the seller and got the price where we needed it and we have been super excited.... until our loan officer informed us of how much we'll need at closing... 

We agreed to pay $165,000 on the house and will be financing it over 30 years with a FHA loan. We will be putting down 3.5%, so with that and closing costs we're going to need around $12,000. We only have about $5,000 we're avle to put down all together. The seller said he will not pay any of the closing costs unless we figured it into the price of the house. Does he mean he'll pay the closing and we'll pay him that much more in the price of the house so we'll end up paying for it in our mortage?

Also is there any kind of creative financing we could do, to pay the down payment and closing costs, without hard or private money?