FHA Closing Costs: The Full List and a Ballpark Estimate

Home buyers often make a budget to start saving for their down payment, but they don't think about saving for their closing costs. In some cases, the FHA closing costs can be as much as or even more than the down payment.

This article will give you a good idea of how much your FHA closing costs will be, if they can be financed, and how to get the seller to pay for them. You'll also find out which closing costs are required for all FHA loans, which costs are made by the FHA lender, and which costs are made by third parties and are likely to happen no matter who your lender is.

How much do FHA closing costs cost?

On average, FHA closing costs are between 2% and 4% of the loan amount. Your actual costs will depend on things like the amount you borrow, your credit score, and any lender fees. Some of the costs are the same for all FHA loans, while others, like your appraisal, are charged by the lender or a third party.

Here is a list of typical FHA closing costs and how much they cost. After you apply for an FHA loan, your lender will give you an estimate of your closing costs called a "good faith estimate."

When to Ask About FHA Closing Costs from the Lender

We often hear borrowers ask lenders right away in the first minute of a conversation what the FHA closing costs are. Before giving you a good estimate, the lender will probably need to find out a lot about you and may even check your credit score.

Once you give the lender all of your information and paperwork, they will give you an estimate that shows exactly what your closing costs will be.

Costs to close on an FHA loan

Here is a list of typical FHA closing costs. These costs are just an estimate, and they may vary slightly depending on your situation, the lender you use, any third parties involved, your credit score, and where you live.

Credit Report: $25 to $50 Every lender will have to charge you for your credit report. If you have your own credit report, it can't be used for your loan. How much are fha closing costs? Every lender has to run a new report, and the monthly payments are automatically filled in on your loan application.

Origination Fee: (.5% to 1%) Some lenders will charge this fee to help pay for some of their costs. After the lender's costs are paid, the rest of what you pay is profit for the lender. If you want to borrow more money, your lender may be willing to lower the percentage of the origination fee.

Discount Points (1% to 2%) We don't see too many FHA loans with discount points. You should only pay points when you want to buy a lower rate. If your lender can lower your rate by.5% by charging you 1 discount point (1% of the loan amount), it may be worth it.

Underwriting Fee: between $350 and $975 Some lenders will charge you a fee for underwriting or processing. This is a fee that not all lenders may charge, and it is likely something that can be negotiated. If you want a small loan, the lender will probably charge you a fee like this to help cover the costs of making a small loan.

Document Preparation Fees range from $50 to $100. Some lenders charge an extra fee called a "document preparation fee" for taking care of all the paperwork and paperwork related to your loan. If you can avoid the underwriting fee mentioned above, it's not so bad to pay a document fee.

Inspection of the home: $300–$400 No matter if you are getting an FHA loan or not, every home buyer should schedule a home inspection. The FHA or the lender do not require the inspection, but it is very important because it can help find any major problems with the house. If necessary, you might want to hire an extra inspector for the septic system.

Appraisal – ($450) Every time you buy a home, the lender will want an appraisal to make sure that the home is worth what you are paying for it. They don't want to lend money against a home that is worth less than the loan amount. The lender will have to hire an appraiser who is approved by the FHA. Costs can be higher for homes that are more expensive or have more than one unit. Getting an appraisal gives you the chance to talk with the seller about the price after the inspection. If you want to get an FHA streamline refinance, you don't need an appraisal.

A property survey (From $400 to $500) will show you the official property line and all the structures on your land, like your house, shed, pool, or any other permanent building. The survey will help you find out if your new neighbor is putting something on your land without your permission. Most importantly, it will tell you if your new home has an addition or a structure that was built too close to a property line and might need to be taken down. At town hall, there may be a copy of a survey that has already been done. Before you pay for a new survey, get a copy of this one. If the survey shows all of the buildings on your property and those of your neighbors, you might not need to pay for a new one. Instead, you could just use this copy.

The lawyer's fee is $750. As an extra layer of protection, many people who buy homes have lawyers look over the contracts. Some lenders also charge borrowers an attorney fee at the end of the loan process. Most of the time, the lawyer will take care of the things listed below that have to do with the title.

$100 for a title search. This is the fee a title company charges to send someone to the town hall to find out if there are any liens on the property you want to buy. At closing, any open liens would have to be paid off. This title search will protect you in case a previous lien on your property comes back to try to get it back.

Title insurance costs from $900 to $1200. This is an insurance policy that you pay for once at closing. It protects you against any future deed or lien claims against your property. Your purchase price is used to figure out how much title insurance you need.

($50) Service Fee for Taxes This fee is used to look into the property's taxes and see if they have been paid up to this point or if they have been paid for future months. Based on what this research has found, the taxes will need to be paid at the closing.

Fees for recording: $70 This is the fee that the county government in your area charges to record the official sale of the house between you and the seller.

Wire Transfer Fee – ($25) This fee is for wiring the money you need to pay off your loan.

Pre-Paid Property Tax – (Varies based upon property taxes of the home). At closing, you will likely have to pay taxes for the next quarter ahead of time. If the seller has already paid for the next few months, he or she will get a credit at closing.

Tax Escrows – (Varies based upon property taxes of the home). Some lenders would rather pay your taxes for you, so they will add them to your monthly payment. The escrow is a tax payment that has already been made, so the lender has money on hand to pay your taxes. If your property taxes go up, your mortgage payment will have to go up to make up for the difference.

Fees for a notary – $10 There isn't always a fee to pay for a notary, but there is a chance that there could be one.

Homeowner's insurance is between $400 and $1200. Your first year's homeowners insurance premium will have to be paid up front. This is usually done right before the closing, and you will have to show proof that it was done. The price of your insurance premium is something you and the insurance company work out together. Prices for homeowner's insurance can go up and down depending on things you may or may not be able to change. They could also go up if you need flood insurance as well.

Fee for Flood Certification: $15 The flood certification is FEMA's official word on whether or not the home you want to buy is in a flood zone. It will help figure out if and how much flood insurance will be needed.

FHA Up-Front Mortgage Insurance Premium (MIP) – (1.75%) This is an insurance policy worth 1.75 percent of the loan amount that comes with every FHA loan. This insurance premium pays for the cost to the government of protecting the lender in case you don't pay back the loan.

For an FHA loan, these are the typical closing costs you can expect to pay. When you compare FHA closing costs to conventional closing costs, the upfront mortgage insurance cost of 1.75 percent of the loan amount is one of the biggest differences. No matter which loan program you choose, most of the other costs will be the same.

Costs of closing for different lenders

When looking for a lender, you should compare closing costs the same way you would compare interest rates. Lender fees are tied to the rate you are given, so you should pay close attention to both the rates and the closing costs.

Most lender closing costs will be about the same, but the origination fees and discount points are often what make them different. Some lenders will raise origination fees or discount points to quote a lower rate. That's fine as long as you know about it and choose to pay more in closing costs to get a lower rate.

If you want to compare the closing costs of different lenders, you should always get an estimate in writing. Fill out this form to get an estimate.

Can FHA closing costs be paid for by a loan?

Some closing costs can be paid for or rolled into the loan, as allowed by FHA rules. Your down payment is not part of your closing costs, and the FHA makes it clear that the minimum borrower contribution to the purchase of the home must be at least 3.5%, even if the money comes from a relative as a gift. If the gift from a relative is big enough, it can pay for both the down payment and the costs of closing.

Rolling FHA closing costs into the loan can help ease some of the sticker shock that comes with closing costs.

Can the seller pay the closing costs for an FHA loan?

FHA rules say that the seller can pay for up to 6% of the home's purchase price in closing costs. This is a great way to get the seller to pay for your closing costs.

How can I lower the closing costs for an FHA loan?

Negotiating with FHA lenders is the best way to get the lowest possible closing costs. They do have some room to move with the fees that the lender charges. It comes down to how much they want to make on your loan compared to how much other lenders are willing to make. We can help you get a quote from a lender with rates and closing costs that are competitive.

If you talk to a lender who says there are no or very few closing costs, make sure that the rate is still competitive. Some lenders may charge higher rates to make up for the low closing costs.

Can a gift cover FHA closing costs?

FHA closing costs can be given as a gift, and the same rules that apply to the down payment also apply to the closing costs.

Are closing costs and the down payment two different things?

Closing costs are never included in the down payment and can never be added to it. But when a lender decides if you are qualified to buy the home, they will add the down payment and closing costs together to figure out how much cash you will need to close the loan.

FHA rules make it clear that the borrower must have a down payment of at least 3.5%, even if that money comes from a gift. The seller, the lender, or any leftover gift money can pay for the closing costs.

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