FHA Closing Costs: What to Know

Sure, you can get a low down payment with a loan backed by the Federal Housing Administration, but that doesn’t mean you'll avoid paying other fees at closing. You will be charged some FHA closing costs, including ones that conventional loans typically don’t require.

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What are FHA closing costs?

FHA closing costs often include the mortgage insurance, lender and third-party fees, and prepaid items that are due when signing your mortgage paperwork. These are paid in addition to your FHA down payment. Here’s the breakdown:

Mortgage insurance premium

The upfront FHA mortgage insurance premium, or MIP, totals 1.75% of your loan amount and is due at closing. You can also finance this charge as a part of your loan.

You’ll also find that an additional ongoing FHA MIP is built into your monthly payment. While the rate remains the same for the life of the loan, the premium is adjusted annually based on the remaining principal loan balance. The annual premium ranges from 0.15% to 0.75% of the average outstanding loan balance.

Upfront and ongoing mortgage insurance premiums are one expense you won't pay on a conventional loan if you make a down payment of 20% or more.

Lender fees

Charges listed as lender fees will have names like:

• Origination fee.

• Underwriting fee.

• Processing fee.

• Supplemental loan origination fee (for FHA 203(k) renovation loans only).

• Interest rate lock fee.

You may also decide to buy discount points — prepaid interest that lowers your loan’s interest rate. Buying discount points is optional, but if you do, you’ll find them listed as a lender fee.