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FHA Loan Closing Costs Explained: MIP, Fees, and How to Save

⚡ Quick Answer

FHA loan closing costs include a mandatory upfront Mortgage Insurance Premium (MIP) of 1.75% of the loan amount, plus standard closing fees. On a $300,000 loan, the upfront MIP alone is $5,250. Total FHA closing costs typically range from 3-6% of the purchase price.

🔑 Key Takeaways

  • FHA upfront MIP is 1.75% of the loan amount — can be rolled into the loan
  • Annual MIP ranges from 0.15% to 0.75% depending on loan terms
  • Seller can contribute up to 6% of purchase price toward closing costs
  • FHA Streamline Refinance can lower costs when refinancing later
  • FHA requires a 3.5% minimum down payment (580+ credit score)
  • FHA appraisal has stricter requirements than conventional appraisals
FHA loans are a popular choice for first-time and lower-credit buyers, but their closing cost structure includes some unique fees you need to understand. ## FHA Closing Cost Components ### Upfront Mortgage Insurance Premium (UFMIP) - **1.75% of the loan amount** — non-negotiable - Can be paid at closing or rolled into the loan balance - On a $300,000 loan: $5,250 (adding this to the loan increases your monthly payment by ~$25) ### Annual Mortgage Insurance Premium (MIP) - Ranges from 0.15% to 0.75% of the loan balance - Paid monthly as part of your mortgage payment - For loans with less than 10% down: MIP lasts the entire loan term - For loans with 10%+ down: MIP removes after 11 years ### Standard Closing Fees Beyond MIP, FHA loans have the same closing fees as conventional loans: - Loan origination fee - Appraisal fee (FHA appraisal required) - Title insurance - Escrow deposit - Recording fees - Prepaid taxes and insurance ## FHA Seller Concession Limits Sellers can contribute up to **6% of the purchase price** toward your closing costs. On a $300,000 home, that is up to $18,000 — enough to cover most or all of your closing costs. ## FHA Streamline Refinance If you already have an FHA loan, the Streamline Refinance program lets you refinance with: - No appraisal required - No income verification - Reduced paperwork - Lower closing costs (often $1,500–$3,000) ## Related Resources - [VA Loan Closing Costs](/blog/va-loan-closing-costs) — Compare with VA benefits - [First-Time Buyer Guide](/blog/closing-costs-for-first-time-buyers) — Programs and help - [Closing Cost Calculator](/#calculator) — Estimate FHA costs

❓ Frequently Asked Questions

  • How much is the FHA upfront MIP?
    The FHA upfront Mortgage Insurance Premium (UFMIP) is 1.75% of the loan amount. On a $300,000 loan, that's $5,250. You can pay it at closing or roll it into the loan balance.
  • Can I roll FHA closing costs into the loan?
    The upfront MIP can be rolled into the loan. Other closing costs must be paid at closing, though you can use seller concessions (up to 6%) or lender credits to offset them.
  • How long do I pay FHA MIP?
    If you put down less than 10%, you pay annual MIP for the entire loan term. If you put down 10% or more, MIP is removed after 11 years. The only way to remove MIP sooner is to refinance.
  • Are FHA closing costs higher than conventional?
    FHA closing costs are typically higher due to the 1.75% upfront MIP. However, the lower down payment requirement (3.5% vs. 3-20%) and flexible credit requirements make FHA attractive despite the extra cost.

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