What Are FHA Closing Costs?
The Federal Housing Administration (FHA) has more lenient borrowing requirements than some other types of home financing. The catch: extra FHA closing costs. Before you apply for an FHA loan, learn more below about what you’ll pay.
Key takeaways
- FHA closing costs include mortgage insurance, lender charges and appraisal fees.
- Closing costs for FHA loans are generally between 2% and 6% of the loan amount.
- Negotiating seller concessions and using lender credits can help reduce your closing costs.
What are FHA closing costs?
FHA closing costs are fees you must pay when you take out an FHA loan. Many of these costs, including credit report fees, underwriting costs and home appraisal fees, are common among other home loan types.
You’ll typically pay between 2% and 6% of your loan amount toward closing costs on a mortgage. The 2025 FHA loan limit for a single-family home in most parts of the country is $524,225, which means the estimated maximum you’d pay in closing costs is between $10,485 and $31,454.
At a glance: FHA loan closing costs
Here’s a breakdown of some of the most common FHA closing costs:
| FHA closing cost | Amount |
|---|---|
| Upfront mortgage insurance premium (UFMIP) | 1.75% of the loan amount |
| Annual mortgage insurance premium (MIP) | 0.15% to 0.75% of the loan amount |
| FHA appraisal | $400 to $700 |
| Lender fees | Varies |
| Third-party and prepaid expenses | Varies |
FHA upfront mortgage insurance premium
The FHA upfront mortgage insurance premium (UFMIP) is a one-time, lump-sum charge that’s due at closing and is typically added to your loan amount. The standard cost is 1.75% of your loan amount — for example, if you borrow $300,000 with an FHA loan, the UFMIP charge is $5,250 ($300,000 x 0.0175 = $5,250).
The UFMIP premium is the same percentage regardless of your loan amount or down payment, with the following exceptions:
- You’ll pay 0.01% of the loan amount for an FHA streamline refinance
- You’ll pay between 2.344% and 3.80% for FHA loans on Hawaiian home lands, depending on your loan term and whether you finance the UFMIP
- You won’t pay a fee for FHA loans on Indian lands
FHA annual mortgage insurance premium
The annual mortgage insurance premium (MIP for short) is an ongoing charge that costs between 0.15% to 0.75% of your loan amount, gets divided by 12 and is added to your monthly mortgage payment. The amount you’ll pay depends on your down payment and repayment term.
Generally, a higher down payment and/or shorter term will equal a lower monthly MIP charge. You’ll pay this type of FHA mortgage insurance for the life of your FHA loan unless you make at least a 10% down payment at closing (which requires MIP payments for only 11 years).
Learn more about FHA mortgage insurance costs.
Are FHA loans more expensive than conventional loans?
Although the mortgage insurance costs are higher on FHA loans than on conventional loans, FHA interest rates tend to be lower than those for conventional mortgage rates. However, once you add the UFMIP and MIP costs, the annual percentage rate (APR) may make them more expensive than a conventional loan. In fact, FHA loans are more likely to be considered “higher-priced mortgage loans” (HPMLs) because of the high cost of FHA mortgage insurance.
Learn more about the difference between an APR and interest rate.
FHA appraisal
Most FHA loans require an FHA appraisal completed by an FHA-approved appraiser to verify your home’s value and condition. You may spend between $400 and $700 for an FHA appraisal, depending on the home’s size and location. FHA appraisers must verify that the home meets FHA health and safety standards and determine the market value, based on nearby home sales.
One unique feature of FHA loans: If your appraisal comes in lower than the purchase price you agreed to, the FHA amendatory clause allows you to cancel the transaction and receive all of your upfront money back if you decide to walk away from the home purchase.
Lender fees
Your lender will charge certain closing fees, such as:
- Origination fee. When a lender issues a loan, it’s called an “origination.” The fee may include processing, underwriting and funding your mortgage.
- Credit report fee. A fee to get a copy of your credit scores and reports.
- Rate lock fee. The lender may charge a fee to lock in your mortgage rate between the time your offer is accepted and your closing date.
- Lender’s title insurance. The lender requires you to pay for a title insurance policy to protect them against any title problems, including judgments or tax liens. You may also want to buy an owner’s policy for additional protection.
- Discount points. Also known as mortgage points, this upfront fee is charged as a percentage of your loan amount to get a lower interest rate.
Third-party and prepaid expenses
You may also owe closing costs to third parties, as well as prepaid expenses, including:
- Escrow account fee. If your property taxes and insurance are included in your monthly mortgage payment, the lender collects a portion of your homeowners insurance, monthly mortgage insurance premium and property taxes, and sets up an escrow account to pay those items.
- Prepaid fees. Prepaid fees are costs you pay before they’re due. For example, this can include prepaying the first year of homeowners insurance premiums.
- Real estate attorney fees. It’s common to work with a real estate lawyer during a real estate transaction. Attorney fees vary by location and firm size, but generally cost $150 to $500 per hour or more.
- Transfer taxes. Some states charge transfer taxes when transferring homeownership from one homeowner to another. State laws may set rules on who can pay them, and in some cases, you may be exempt from them. However, they can make up a big chunk of your total closing costs.
How to lower FHA closing costs
Although you can’t avoid FHA closing costs altogether, there are some ways to reduce the amount you pay out of pocket.
Ask for a gift
A relative, friend, employer, charity or local government agency providing closing cost assistance for first-time homebuyers can gift you money toward your FHA closing costs. You must document proof of the gift funds and the donor is required to sign a gift letter.
Apply for a closing cost assistance program
Banks and housing finance agencies in your area may offer FHA closing cost assistance. There may be income limits and other restrictions, so read the fine print before you apply.
Ask the seller to pay them
Up to 6% of the home’s sales price can be paid by the seller, and the credit can be used to pay the UFMIP.
Get a lender credit
Your lender may be willing to cover some or all of your closing costs, but in return, they’ll charge you a higher interest rate.
Roll the costs into your loan
Yes, closing costs can be included in your FHA loan amount if your lender offers a no-closing-cost loan.
→ How to finance FHA closing costs on a purchase loan: Increase your interest rate or loan amount and ask the lender to pay the fees. To roll in closing costs on a regular FHA refinance loan, you can only increase your loan amount.
→ How to finance closing costs on an FHA streamline refinance: Your only option is to have the lender pay your closing costs with a lender credit in exchange for a higher rate.
Within three business days of completing a loan application, your FHA-approved lender must provide you with a loan estimate, so you can review the terms and closing costs. Keep a copy of this document to compare to the closing disclosure you’ll receive three days before closing.
Frequently asked questions
No, paying your FHA closing costs with a credit card isn’t an option. FHA loan programs set requirements for how funds — including earnest money and any funds being gifted to a borrower — can be transferred. In many cases, they must be sent by wire transfer or paid with a cashier’s check.
You can refinance an FHA loan with no closing costs, but only if you use an FHA credit-qualifying refinance rather than an FHA noncredit qualifying refinance. The credit-qualifying refinance allows you to roll your closing costs into the loan, but you’re also required to go through the traditional steps of verifying your income, debt-to-income (DTI) ratio and credit score.
No, a down payment is considered to be totally separate from closing costs. Neither counts toward the other, and you’ll need to put down at least 3.5% of your loan amount to qualify for an FHA loan.
It takes around 42 days to close on an FHA purchase loan, according to data from ICE Mortgage Technology. FHA refinances are slightly slower, usually taking around 46 days to close on average.