FHA Loan Closing Costs

What FHA Loan Closing Costs Include

FHA loan closing costs typically run 2% to 6% of the loan amount, according to HUD estimates. On a $350,000 loan, that range works out to $7,000 to $21,000. The spread is wide because location, lender, and timing all push the total around. These costs fall into four main categories, and understanding each one tells you where your money is going and which parts you can actually control.

Upfront Mortgage Insurance Premium (UFMIP). The UFMIP equals 1.75% of the base loan amount. It is the one fee unique to FHA loans. On a $350,000 loan, that comes to $6,125. Most borrowers roll this into the loan rather than paying it at closing. We cover that decision in the next section.

Lender fees. These cover origination, underwriting, and processing. Origination fees typically run between 0% and 1% of the loan amount. Underwriting fees often land around $1,000. Credit report fees add roughly $130 to $150.

Third-party fees. These go to outside providers: the appraiser, title company, and settlement agent. FHA appraisals tend to cost slightly more than conventional ones because FHA holds stricter property standards. Budget $700 to $950 for the appraisal and $1,200 to $1,800 for title services, though both vary by state and purchase price.

Prepaids and escrow setup. These are advance payments your lender collects at closing to fund your escrow account. Expect 12 months of homeowner’s insurance prepaid plus two to three months held in reserve, and two to six months of property taxes depending on when in the year you close. Per diem interest from your closing date to the end of the month adds a smaller charge on top.

In our experience working with Colorado and Florida buyers, the escrow setup consistently surprises borrowers more than any other line item. Lender fees show up on the Loan Estimate early and feel concrete. The prepaid total often stays abstract until it appears as a real number on the Closing Disclosure a few days before you sign.

The Upfront Mortgage Insurance Premium: What It Is and What You Actually Owe

The UFMIP is the fee most articles mention but few explain fully. Here is what matters for your closing budget.

The UFMIP is 1.75% of the base loan amount on every FHA purchase, regardless of your credit score or down payment size. You pay it once. After that, a separate annual premium gets divided into monthly installments and added to your mortgage payment. For most 30-year FHA borrowers putting down 3.5%, that annual MIP runs 0.55% of the loan balance per year. On a $350,000 loan, that works out to roughly $160 a month.

The key decision at closing: do you pay the UFMIP in cash, or roll it into the loan? Most borrowers finance it. Rolling it in means your $350,000 loan becomes roughly $356,125. You will pay interest on that added amount over time, but it removes the single largest line item from your cash-at-closing total. For buyers who are already stretching on the down payment, this is often the right move.

One detail most buyers miss: how long you pay the annual MIP depends entirely on your down payment. Put down less than 10%, and MIP continues for the life of the loan. Put down 10% or more, and it cancels after 11 years. If you want to eliminate MIP before that point, the most common path is refinancing into a conventional loan once you build enough equity. That possibility matters when you are deciding how much of the UFMIP to finance versus pay at closing, because it affects how long the extra loan balance stays with you.

FHA vs. Conventional Closing Costs: The Real Comparison

The UFMIP is what makes FHA look more expensive on paper. Conventional loans carry no upfront mortgage insurance premium. But since most FHA borrowers finance the UFMIP into the loan, the cash they bring to closing is often comparable to a conventional loan. Lender fees, title costs, and prepaids run roughly the same on both loan types.

FHA’s 6% seller concession limit is more generous than what conventional loans allow at most down payment levels. In Colorado’s current market, seller credits are increasingly available, and that gap matters when cash is tight. Colorado buyers also benefit from a closing cost environment that runs well below the national average. According to 2025 data from LodeStar Software Solutions, average closing costs in Colorado landed at $3,470 including recording fees and taxes, compared to a national average of $5,410. That difference adds up.

Florida tells a different story. Closing costs in Florida run significantly above the national average, partly because the state charges a documentary stamp tax on the mortgage note itself. That tax applies to the loan amount and adds a meaningful line item that Colorado buyers do not face. Working with a Colorado mortgage broker who knows local fee norms, or a Florida lender who understands the state’s specific cost structure, helps you set realistic cash-to-close expectations before you make an offer.

How to Reduce Your FHA Closing Costs

You have more options here than most buyers realize. These five consistently make the biggest difference.

Ask the seller to contribute. FHA allows the seller to pay up to 6% of the home’s sale price toward your closing costs, prepaids, and discount points. On a $350,000 home, that’s up to $21,000. Seller concessions are worth structuring into every offer when cash is tight. A credit toward closing costs can also be more appealing to a seller than a price reduction of the same dollar amount, because it affects their net differently. Your agent should know how to frame that conversation.

Finance the UFMIP. Rolling the 1.75% upfront MIP into the loan removes the single largest fee from your cash-at-closing total. Your loan balance increases slightly, but your out-of-pocket at closing goes down by the full amount. For most buyers who are not flush with cash after the down payment, this is the first lever to pull.

Request lender credits. A lender credit means the lender covers some of your closing costs in exchange for a slightly higher interest rate. This trade-off makes sense when you are short on cash but comfortable with a modestly higher monthly payment. Ask your lender to show you the break-even point over five and ten years before you commit. Knowing that number helps you decide whether the rate increase is actually worth it for your situation.

Shop for third-party services. Your Loan Estimate marks which services you can get competing quotes for. Title insurance, settlement fees, and pest inspections typically appear on that list. Getting two or three quotes for title services alone can save several hundred dollars. Your lender is required to give you a list of approved providers, but you are free to use your own. Most buyers do not know this, and as a result, they pay whatever the lender’s preferred vendor quotes.

Look into state assistance programs. Colorado’s CHFA programs offer down payment and closing cost assistance for eligible buyers. Florida has comparable programs through Florida Housing. Both states set income and purchase price limits, so eligibility varies. Checking your down payment options early in the process, before you make an offer, can reveal assistance you did not know you qualified for.

If you are buying in Florida, ask your Florida mortgage broker about county and city programs in addition to statewide options. Local programs sometimes fill gaps that state-level assistance does not cover, and availability varies significantly by market.

One thing worth understanding about “no closing cost” loans: the costs do not disappear. They either fold into a higher interest rate or get added to the loan balance. That approach is not inherently a bad deal, but the long-term math should be shown to you clearly before you sign anything.

What to Watch on Your Loan Estimate

The Loan Estimate is a three-page standardized document your lender must provide within three business days of your application. It is your clearest picture of what closing will cost and where lender comparisons should start.

Three sections matter most for FHA borrowers.

Section A, Origination Charges. These are direct lender fees. They carry zero tolerance, meaning the lender cannot charge more at closing than what appears here. When you receive Loan Estimates from multiple lenders, Section A is where the real cost differences show up.

Section B, Services You Cannot Shop For. These are third-party fees for providers the lender selects. The total for this section can increase by no more than 10% at closing.

Section C, Services You Can Shop For. This is where you have pricing power. Your lender will give you a list of approved providers, but you are free to use your own. Getting competing quotes for title insurance and settlement fees can reduce your total by several hundred dollars without changing a single term of your loan.

Three business days before closing, you will receive a Closing Disclosure. Compare it line by line to your Loan Estimate. The CFPB holds lenders to strict tolerance limits on most fee categories. If a fee increased beyond the allowed amount, you can request an explanation and may be entitled to a refund. Reviewing the Closing Disclosure carefully before closing day gives you time to raise concerns without pressure. This is exactly where working with a lender who explains every line matters, because a buyer who does not know what to look for often pays more than they should.

Reed Letson

Mortgage Broker · NMLS #1655924

Reed Letson is a licensed mortgage broker and owner of Elevation Mortgage. Elevation Mortgage helps home buyers and homeowners across Colorado and Florida with a focus on education and transparency. Our goal is to cut the fluff and give you tactical insights without the sales pitch.