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Can FHA Closing Costs Be Paid By The Seller?

Dan Miller9-minute read
February 24, 2022

If you’re buying a new home with an FHA loan, you’ll want to have an idea of how much money you'll need for fees, taxes and other required costs. These FHA loan closing costs are usually paid by the buyer as part of the closing process, in addition to the actual purchase price of the home. Knowing what to expect can help make sure that your home buying experience is a pleasant one.

What Are FHA Loan Closing Costs?

There are many advantages to buying a home with a loan from the Federal Housing Administration (FHA). Closing costs are fees charged by mortgage lenders and other parties that are often paid by the buyer at closing, in addition to the purchase price of the home. FHA closing costs generally are anywhere from 2% – 6% of the home sale, though closing costs vary by state, city and local jurisdiction. Depending on the specific FHA closing cost, they are either paid by the buyer or paid by the seller as part of the FHA seller concessions.

What Closing Costs Will You Pay For On An FHA Loan?

Closing costs for an FHA mortgage consist of a few different items. These include the mortgage insurance premium (MIP), lender fees, third-party fees, along with prepaid and escrow items.

Mortgage Insurance Premium

Mortgage insurance premium (MIP) is one type of FHA loan closing cost, similar to private mortgage insurance (PMI). There are generally two different types of MIP that borrowers will pay on an FHA loan:

  • Upfront mortgage insurance premium (UFMIP)
    • UFMIP is included in FHA closing costs as a one-time fee that you pay at closing. Currently, FHA loans charge 1.75% of the loan amount in UFMIP, which you can either pay at closing or include in your loan balance.
  • Annual mortgage insurance premium (MIP)
    • In addition to paying an upfront mortgage insurance premium, FHA borrowers will also pay an annual mortgage insurance premium (MIP). MIP is generally included in your monthly mortgage payment, and is calculated based on a percentage of your total loan amount. What percentage you have to pay for MIP and how long you have to pay MIP will depend on the size of your loan and your total down payment.

Lender Fees

Lender fees are another type of FHA loan closing cost, and consist of a variety of different fees related to the creation of your loan. Lender fees can vary by lender, so make sure to compare rates and fees from a variety of lenders.

Origination Fee

An origination fee is a fee charged by the lender for issuing your mortgage or loan.

Underwriting Fee

Many lenders also charge fees for costs incurred during the underwriting process.

Closing Document Preparation Fee

There are a variety of legal documents that are required during the transfer of real estate, such as the recording of the actual deeds. While there are fees for the recording of these documents (see below), your lender may charge an additional and separate fee to prepare these documents.

Interest Rate Lock Fee

Interest rates can be very volatile, so you may want to pay an interest rate lock fee in order to lock in an interest rate when it is most advantageous for you. These interest rate lock fees will appear on your closing statement.

Discount Points

If you're planning on staying in your home for several years, it may make sense for you to pay a one-time upfront charge in order to lower your interest rate for the life of your loan. These upfront fees are called discount points and are usually assessed as a lender fee at closing.

Third-Party Fees

In addition to fees charged by your lender, there are a variety of third-party fees that are also considered FHA loan closing costs.

Title Insurance Premium

Lenders often will take out a title insurance policy that you as the borrower have to pay for at closing. Title insurance protects the lender in case there are issues with the legitimacy of the property's deed or title.

Notary Fee

If your state requires title transfers to be notarized, these notary fees will be paid at closing.

Credit Report Fee

Some lenders will also charge a fee to look up your credit report as part of the mortgage approval process.

Recording Fee

Recording fees include things like the costs to record the deed and/or mortgage with your local county clerk.

Appraisal Fee

Most lenders require an appraisal of the home in order to make sure that it is worth enough to justify the loan that they are making. These appraisal fees are usually paid by the seller at closing.

Courier Fee

Courier fees can be assessed to cover the charges of providing documents to various sources at closing.

Real Estate Attorney Fee

As the name suggests, a real estate attorney fee is charged for the services of a practicing real estate lawyer.

Flood-Zone Certification Fee

If the subject property is in a flood zone, you may be charged a fee to certify the flood zone status for the life of the loan.

Prepaid And Escrow Items

Another type of closing costs for FHA and other loans are various prepaid and escrow items:

Tax And Insurance Escrow Deposits

If you’re setting up an escrow account for your taxes, insurance and other annual costs, you will generally have to fund the escrow account at closing. This will usually mean paying several months of prorated tax and insurance premiums into your escrow account at closing.

Flood And Hazard Insurance Premium

When you get an FHA loan, you’ll be required to get hazard insurance and possibly flood insurance. These initial insurance premiums may appear as an item on your closing statement.

Property Taxes

All states charge property taxes in one form or another. These will be prorated based on your closing date. Depending on whether your state charges property taxes in arrears, taxes may appear on the closing statement as a charge to either the buyer or seller.

Per Diem Interest

Depending on how close your closing date is until the end of the month, you may have to pay a prorated interest charge for every day until the 1st of the month.

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How To Calculate Closing Costs For Your FHA Home Loan

FHA loan closing costs can be calculated or estimated based on the approximate value of your home, your interest rate and how much money you are using as a down payment. It's important to have an estimate for the total amount of closing costs when determining how much house you can afford.

FHA Closing Cost Calculator

To calculate the closing costs on an FHA loan, you will want to estimate and add up the lender fees, third-party fees and prepaid items. Here's an example of an FHA loan closing cost calculation:

Lender fees:

  • Loan origination fee – $2,500
  • Loan application fee – $300
  • Interest rate lock fee – $500
  • Discount points – $0

Third-party fees:

  • Title insurance premium – $800
  • Recording and document fees – $100
  • Appraisal fee – $600
  • Home inspection – $400

Prepaid items:

  • Annual homeowners insurance premium – $1,500
  • Property taxes – $2,000

In this scenario, your total FHA closing costs would be $8,700. Of course, these totals can vary wildly depending on the amount of your loan and the lender you choose, but this should give you an idea of the types of closing costs you need to account for.

How To Lower Your Closing Costs On An FHA Loan

FHA loan closing costs come in two different categories. Some costs are fixed, while others you can shop around for or negotiate. Here are a few tips on how you can lower your closing costs on an FHA loan:

Ask For A Seller Concession

One option would be asking for an FHA seller concession. Seller concessions are costs that a seller opts to pay at closing to reduce the total closing costs that the buyer has to pay. Asking for seller concessions can be difficult in a hot housing market, but some sellers might agree to them if it means the difference between closing the sale and having the buyer walk away.

Use A Cash Gift

Another way that you can reduce the amount of closing costs that you have to pay is with a gift from a friend or family member. If someone is giving you gift money, they will usually have to sign a donor letter indicating that the money is a gift and not a loan.

Finance Closing Costs

You can also choose to finance some of your closing costs into your loan. While this means paying more interest over the term of the loan, this can make sense as a way to lower the total amount you have to pay at closing. If you do finance some of your closing costs, this will likely increase your monthly payment.

Compare Lender Fees

There are many different lenders that offer FHA loans, so you'll want to shop around. Getting multiple different quotes can help you find a lender that fits your situation the best. As you compare lenders, make sure to look at not only the interest rate they offer but any lender fees that they charge.

Apply For FHA Closing Cost Assistance

A final avenue to consider is taking advantage of closing cost and down payment assistance grants and programs for FHA loans. You may be able to qualify for a grant, loan or even assistance from your employer. There are many different programs available, so make sure to educate yourself to see which ones you might qualify for.

The Bottom Line

There are a wide variety of FHA loan closing costs, some of which are fixed and others which may be negotiable. Understanding the different types of taxes, lender fees, third-party fees and other closing costs can help you to know the true cost of buying a home. Being knowledgeable about these costs can make sure that you have enough of a down payment to qualify for an FHA loan.

And now that you know how much it costs to close on an FHA loan, start your home buying process by getting approved with Rocket Mortgage®.

Get approved to buy a home.

Rocket Mortgage® lets you get to house hunting sooner.

Dan Miller

Dan Miller is a freelance writer and founder of, a site that helps families to travel for free/cheap. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and 6 kids.