When you hear the term “closing costs”, it generally refers to a group of fees that must be paid during the settlement process. It’s true that you can get a lower down payment on an FHA loan, but you will still have to pay closing fees. Closing costs for Federal Housing Administration loans will apply, including some that conventional loans don’t often require. FHA loan closing costs can include such things as lender origination fees, attorney fees, appraisal and inspection fees and more.
What are the FHA loan closing costs and fees?
FHA closing costs comprise of the upfront mortgage insurance, annual mortgage insurance, third-party fees and prepaid items due at signing of your mortgage paperwork. These costs are in addition to the FHA downpayment, and can be broken down as follows:
Mortgage Insurance Premiums (MIP)
The FHA Upfront Mortgage Insurance Premium, or UFMIP, is a mandatory fee that equals 1.75% of the loan amount. The FHA MIP must be paid at closing, though the amount can be financed into your mortgage and paid over time.
FHA Annual Mortgage Insurance Premium is an ongoing FHA MIP that adds 0.45% to 1.05% to your monthly payment. The rate is the same throughout the loan’s term, but the premium is adjusted annually according to the principal loan balance.
If you pay 22% or more down, you will not have to pay any mortgage insurance premiums.
Allowable Lender and Third-Party Fees
The FHA has a list of allowed fees that can be charged to the borrower. These fees are referred to as “allowable closing costs”, and can vary from lender to lender. When comparing lenders for an FHA Mortgage, it is important to obtain a Good Faith Estimate so you can compare these FHA Mortgage Fees. FHA Mortgage Fees that are currently allowed include:
- Lender Origination Fee
- Deposit Verification Fee
- Attorney’s Fee
- Appraisal Fee
- Home Inspection Fee
- Title Insurance
- Title Examination Fee
- Document Preparation Fee
- Property Survey Fee
- Credit Report Fee
- Transfer Stamps
- Recording Fee