FHA Loan Closing Costs: What You'll Actually Pay (And How to Reduce Them)
You've been saving for a down payment, and you've landed on an FHA loan because the 3.5% minimum down payment fits your budget. Then you see the Loan Estimate, and the cash you need at closing is significantly more than 3.5%. What happened? FHA loan closing costs happened — and they're one of the biggest budget surprises for first-time buyers.
The good news: once you understand what these fees actually are, you'll see that some are fixed, some are negotiable, and some can be reduced or shifted entirely. This guide breaks it all down — and includes an interactive calculator so you can estimate your own numbers.
What FHA Closing Costs Actually Include
FHA closing costs fall into four main categories. Some are specific to the FHA program, while others show up on any mortgage regardless of loan type.
1. Upfront Mortgage Insurance Premium (UFMIP)
This is the fee that sets FHA apart. According to HUD, the FHA upfront mortgage insurance premium is 1.75% of the base loan amount. On a $300,000 loan, that's $5,250. It's a meaningful number, and it catches many buyers off guard because it doesn't exist on conventional loans.
Here's the part most articles skip: you usually don't have to pay the UFMIP out of pocket. Most borrowers finance it by rolling it into the loan balance. So your $300,000 loan becomes $305,250. You'll pay interest on that extra amount over time, but it won't require additional cash at the closing table.
2. Lender Fees
These cover the lender's cost of processing and underwriting your loan. Common charges include:
- Origination fee: Typically 0%–1% of the loan amount
- Underwriting fee: Usually around $1,000
- Credit report fee: Around $130 - $150
- Rate lock fee: Some lenders charge this; many don't
3. Third-Party Fees
These go to companies other than your lender — and you can often shop around for lower prices on some of them.
- Appraisal: $650–$900 (FHA appraisals tend to cost slightly more due to stricter property standards)
- Title search and insurance: $1,200–$1,800, depending on your state and purchase price
- Survey fee: $300–$600 (not always required)
- Attorney or settlement fee: Varies by state
4. Prepaid Items and Escrow Setup
These aren't technically "fees" — they're advance payments for taxes and insurance that get placed in your escrow account. But they show up on your closing disclosure and require cash at closing:
- Homeowner's insurance premium: 12 months prepaid + 2 - 3 months in escrow
- Property taxes: 2–6 months prepaid, depending on when you close
- Per diem interest: Daily interest from your closing date to the end of the month
| Fee Category | Estimated Range |
|---|---|
| Upfront MIP (1.75%) | $5,250 (usually financed) |
| Lender fees (origination, underwriting, credit report) | $1,500 – $3,500 |
| Appraisal | $650 – $900 |
| Title services and insurance | $1,200 – $1,800 |
| Government recording fees | $100 – $400 |
| Prepaid taxes, insurance, per diem interest | $2,000 – $5,000 |
| Total estimated cash at closing (excluding UFMIP) | $5,400 – $11,600 |
According to the CFPB, closing costs on a home purchase typically range from 2% to 5% of the loan amount, not counting the down payment. With FHA's UFMIP added, your total closing costs can run 3% to 6% — though the cash you actually bring to closing is usually lower since the UFMIP gets rolled in.
Estimate Your FHA Loan Closing Costs
Use this calculator to get a rough estimate of what you might pay at closing. Enter your loan amount and purchase price, and we'll break it down by category.
FHA Closing Cost Calculator
These are estimates based on typical ranges. Your actual costs will depend on your lender, location, and loan details.
| Fee | Low Estimate | High Estimate |
|---|
* The UFMIP is shown separately because most borrowers finance it into the loan rather than paying it at closing. Your out-of-pocket total depends on whether you finance the UFMIP. Use our mortgage calculator to see how the financed UFMIP affects your monthly payment.
FHA vs. Conventional: How Closing Costs Compare
One of the most common questions we hear: "Are FHA closing costs higher?" The honest answer is that they're structured differently, and the net difference depends on your situation.
| Cost Item | FHA | Conventional |
|---|---|---|
| Upfront Mortgage Insurance Premium | 1.75% of loan amount | None |
| Monthly mortgage insurance | 0.50%–0.55% annually (for life of loan unless you put down 10% or more, then its 11 years) | PMI required if <20% down (removable later) |
| Seller concession limit | Up to 6% of sale price | 3%–9% depending on down payment |
| Appraisal requirements | Stricter property standards, may cost more | Standard appraisal |
| Origination & lender fees | Similar | Similar |
| Title, recording, prepaids | Similar | Similar |
The upfront MIP is the main reason FHA total closing costs run higher on paper. But since it's usually financed, your out-of-pocket cost at closing may be similar to a conventional loan — or even lower, depending on how much the seller contributes.
Five Ways to Reduce Your FHA Closing Costs
You have more options here than most people realize. Some of these strategies can cut thousands off your closing day total.
1. Ask the Seller to Contribute
Per FHA guidelines, the seller can pay up to 6% of the home's sale price toward your closing costs. On a $350,000 home, that's up to $21,000 — more than enough to cover typical closing costs. Seller concessions are common in buyer-friendly markets, though harder to negotiate when inventory is tight.
2. Finance the UFMIP
As mentioned, rolling the 1.75% upfront MIP into your loan balance removes the single largest line item from your cash-at-closing total. You'll pay interest on it over time, but it can be the difference between affording the home now and waiting another year to save.
3. Request Lender Credits
A lender credit means the lender pays some of your closing costs in exchange for a slightly higher interest rate. This trade-off can make sense if you're short on cash but comfortable with a modestly higher monthly payment. Your loan officer should be able to show you both options side by side.
4. Shop for Third-Party Services
Your lender is required to give you a Loan Estimate within three business days of your application. That document clearly marks which services you can shop for — typically title insurance, the survey, and pest inspections. Getting two or three quotes can save you several hundred dollars.
5. Look Into Down Payment and Closing Cost Assistance
Both Colorado and Florida have state and local programs that provide grants or low-interest loans to help with closing costs. Colorado's CHFA programs, for example, offer down payment assistance that can also be applied to closing costs. These programs have income and purchase price limits, but they're worth checking. Talk to a Colorado mortgage broker or Florida mortgage broker who can walk you through what's available in your area.
What to Watch for on Your Loan Estimate
The Loan Estimate is a three-page document standardized by the CFPB, and it's your best tool for understanding and comparing closing costs. According to the CFPB, lenders are held to strict tolerance rules — meaning many of the fees quoted on your Loan Estimate can't increase by more than 10% at closing, and some can't increase at all.
Focus on three areas:
- Section A (Origination Charges): These are direct lender fees. Zero-tolerance — what they quote is what you pay.
- Section B (Services You Cannot Shop For): Fees for services the lender selects. 10% tolerance on the total.
- Section C (Services You Can Shop For): This is where you have pricing power. Get competitive quotes.
If you see charges jump between your Loan Estimate and your Closing Disclosure, ask your lender to explain every change. You're entitled to a clear accounting of what shifted and why.
Curious About Your FHA Down Payment and Cost Options?
Understanding closing costs is just one piece of the puzzle. Our guide walks through the real down payment options available to FHA borrowers — including assistance programs in Colorado and Florida.
Explore Down Payment OptionsFrequently Asked Questions About FHA Closing Costs
The upfront mortgage insurance premium (UFMIP) — which is 1.75% of the loan — can be financed into your loan balance, and most borrowers do exactly that. However, other closing costs like lender fees, title insurance, and prepaids cannot be rolled into the loan. Those need to be covered by cash, seller concessions, lender credits, or assistance programs.
A safe planning number is 3% to 5% of the purchase price on top of your down payment. On a $300,000 home, that means budgeting roughly $9,000 to $15,000 in addition to the $10,500 down payment (at 3.5%). Your actual total depends on your location, lender, and whether you negotiate seller concessions.
Yes. FHA allows the seller to contribute up to 6% of the sale price toward the buyer's closing costs, prepaids, and discount points. This is a powerful tool, especially in markets where sellers are motivated. Your real estate agent can help structure the offer to include a seller concession.
The total closing cost figure is typically higher for FHA because of the 1.75% upfront mortgage insurance premium. But since that premium is usually financed into the loan, the amount of cash you bring to closing may be comparable. The lender fees, title costs, and prepaids are similar between the two loan types.
The upfront MIP is a one-time charge of 1.75% paid (or financed) at closing. The annual MIP is an ongoing charge — typically 0.50% to 0.55% of the loan balance per year — that gets divided into 12 monthly installments and added to your mortgage payment. Both are required on FHA loans, but they serve different purposes in your budget.