FHA Loan Closing Costs
Buying a home comes with more than a down payment. You'll also have closing costs, which help cover the work needed to get your loan approved, verify the home's value, transfer ownership and set up things like taxes and insurance.
Let's walk through what FHA closing costs usually include, how much they may cost and a few ways you may be able to reduce what you pay upfront.
In a Nutshell
- FHA closing costs usually range from 3% to 6% of your loan amount.
- FHA loans include two types of mortgage insurance: an upfront premium paid at closing and an annual premium paid in monthly installments.
- FHA buyers can often use seller credits, lender credits, gift funds or down payment and closing cost assistance programs to help cover closing costs.
What Are FHA Loan Closing Costs?
FHA closing costs are the fees and prepaid expenses you pay when your home loan closes. They include:
| Lender fees | The cost to process, review and prepare your loan |
| Third-party fees | Services like the appraisal, title work, credit report and recording fees |
| Prepaid costs | Items you pay ahead of time, like homeowners insurance, property taxes and prepaid interest |
| FHA mortgage insurance | FHA's required mortgage insurance premium, often called MIP |
It's important to know that they aren't set in stone. Instead, they're comprised of dozens of smaller fees that can vary widely depending on the service providers you choose, your location, and your loan amount. Below, we'll outline each type of closing cost and explain what it means.
How Much Are FHA Loan Closing Costs?
FHA closing costs commonly fall between 3% and 6% of the loan amount. So if your loan amount is $300,000, your closing costs may be around $9,000 to $18,000.
That range is wide because every homebuying journey is different. A buyer in one county may pay different taxes and recording fees than a buyer in another. A home with HOA dues may have different upfront costs than a home without them. Your lender fees, title fees and insurance costs can also vary.
The best way to know what you may pay is to review your Loan Estimate. This document breaks down your estimated loan costs, closing costs and cash needed to close.
FHA Mortgage Insurance Premium
Mortgage insurance helps protect the lender if a borrower stops making payments. With FHA loans, this is called mortgage insurance premium, or MIP.
FHA mortgage insurance has two parts: upfront and annual. Upfront MIP is typically 1.75% of the base loan amount. You can often pay it at closing or roll it into your loan. Annual MIP is charged each year, divided into monthly payments and added to your mortgage payment. The amount depends on your loan details, but is usually about 0.55% of the loan amount.
For many FHA loans, annual MIP stays for the life of the loan. If you provide at least a 10% down payment at closing, MIP may be removable after 11 years.
FHA Closing Costs Breakdown
Here are some of the costs you may see on your Loan Estimate and what they mean.
Lender Fees
These fees compensate your lender for all they do in the loan process. They include application fees, processing fees, and underwriting fees, to name a few. Keep in mind that these fees can be highly variable.
Here's a look at some common lender-side fees on FHA loans:
| Fee | What It Means | Estimated cost |
|---|---|---|
| Application Fee | This covers the administrative costs of processing your loan application. | Up to $500 |
| Processing/Underwriting Fee | Covers the work of reviewing your application, documents and financial information. | $500 to $1,000 |
| Origination Fee | A fee some lenders charge to create and prepare your loan. | Up to 1% of your loan amount |
| Credit Report Fee | Covers the cost of pulling your credit report. | About $30 to $100 |
| Discount Points | Optional upfront cost you may pay to lower your interest rate. | About 1% of your loan amount per point |
| Rate Lock Fee | May apply if you choose a special rate lock or need to extend your lock period. | Up to 0.50% of your loan amount |
| Prepaid Interest | Covers interest from your closing date to your first mortgage payment. | Varies |
Third-Party Fees
You will also owe fees to third parties involved in the loan process, including appraisers, inspectors, real estate agents and title companies.
Here's a list of potential third-party fees.
| Fee | What It Means | Estimated cost |
|---|---|---|
| FHA Appraisal Fee | Pays for an FHA-approved appraiser to review the home's value and condition. | About $400 to $800 |
| Title Fees | Helps confirm the seller has the right to transfer ownership of the home. | About $500 to $2,000 |
| Title Insurance | Helps protect against certain ownership or title issues. | About 0.40% of the loan amount |
| Notary Fee | Pays for notarizing required documents, if charged separately. | $500 to $1,000 |
| Recording Fee | Pays the local government to record the home sale and mortgage documents. | About $300 |
| Flood Certification Fee | Checks whether the home is in a flood zone. | $15 to $50 |
| Agent Commissions | Pays real estate professionals involved in the transaction, if applicable. | Typically, 3% of the loan amount per agent that is involved |
| Attorney Fees | May apply in states where an attorney is required or commonly used for closing. | About $500 to $1,500 |
| Courier Fee | Covers document delivery if physical paperwork needs to be transported. | $25 to $150 |
You may be able to reduce these costs by shopping around for service providers. To see what services you can shop around for, look at page 2 of your Loan Estimate.
Property Related Expenses
You also pay several property-specific closing costs. These cover things like taxes, insurance, HOA dues, and more.
Here's a look at some typical property-related closing costs for FHA loans:
| Fee | What It Means | Estimated cost |
|---|---|---|
| Home Insurance Premium | Covers the cost of insuring your home against certain damage or loss. | Varies by coverage amount and insurer |
| Property Taxes | Goes toward local taxes on your property. | Varies by location |
| HOA Dues | Applies if the home is part of a homeowners association. | About $200 to $400 per month |
| Home Warranty | You can pay this optional cost to cover common home repairs and defects. | About $500 to $900 per year, if purchased |
| Survey Fee | Pays for a professional survey of the property boundaries, if required. | About $400 to $1,000+, if required |
How to Pay for FHA Loan Closing Costs
Closing costs can be expensive, but not all have to come out of your own pocket.
You can explore:
- Seller credits and concessions: On FHA loans, sellers can contribute up to 6% of the total purchase price toward closing costs. A seller might be willing to do this if they're particularly eager to sell the house or if the home is located in a buyer's market, where the number of homes for sale far surpasses the number of buyers. Talk to your agent if you're considering this strategy, and they can negotiate on your behalf.
- Lender credits: You can ask your lender to cover some of your closing costs. These are called lender credits and typically mean taking a higher interest rate on your loan.
- Gift funds: FHA loans allow gift funds, so if you have a family member willing to contribute toward your home purchase, that's one option to consider. Just make sure it's not a loan and does not need to be repaid (otherwise, the lender won't allow it).
- Down payment and closing cost assistance: Many cities, states, and non-profit organizations offer assistance programs to help cover some or even all of your down payment or closing costs. Common types include low-cost loans (some of which are forgivable) or grants, which don't need to be repaid at any point.
- Shopping for services: Some third-party closing services can be shopped for, such as certain title and settlement services. Your Loan Estimate can show which services fall into this category.
The Bottom Line
FHA closing costs can feel like one more hurdle, but they are easier to plan for when you know what to expect.
Most buyers can expect FHA closing costs to fall somewhere around 3% to 6% of the loan amount, though your actual number may be higher or lower based on your loan and location. Some costs may be negotiable, and you may have ways to reduce what you pay out of pocket.
The best next step is to look at your full homebuying picture, not just one fee. A Neighbors Bank loan officer can help you understand your estimated cash to close and walk through options that may make homebuying feel more achievable.
Frequently Asked Questions
Have a question we haven't already answered? Ask a Neighbors Bank FHA loan expert. We're happy to answer any questions you have along the way.
Dan Bartelt has over 16 years of mortgage industry experience. He’s held roles as a loan officer and processor and has spent the past 8 years as an underwriter. Dan views underwriting as solving a puzzle—piecing together details to create a compelling loan story.