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What You Need To Know About FHA Loan Closing Costs

January 29, 2024

FHA mortgages

How much cash to close do you need for an FHA mortgage? Many sources cite a number between 2% and 6% of the purchase price. 

Borrowers typically need to learn how much home is affordable early in the planning stages. Make these calculations as early as possible to help you save for both the down payment and closing costs.

How Much You Can Afford To Borrow?

An online mortgage calculator can help you get an idea of how much loan to apply for. Borrowers may be tempted to view that number as being flexible but that can come with a price. Beware of what some call “cost creep.” 

A little leeway on a service cost, a higher-than-expected expense, and over time it’s possible to find yourself moving outside your budget. Be mindful about what you choose to finance and what you choose to pay upfront.

Closing Costs Are Separate

The money you pay to close, such as mortgage insurance, appraisal fees, and lender fees, among other expenses, is never considered part of your down payment on an FHA mortgage. The down payment amount is not changed by any other cash payment at closing.

Some Mortgages = More Money Down

An FHA One-Time Close construction loan may require more than the minimum money down. This may depend on the lender and other variables. For example, borrowers who don’t meet the minimum FHA FICO score requirements for a purchase loan may also be asked to pay more down.

You’ll want to know whether or not to expect these higher costs early in your planning stages.

Follow Closing Cost Payment Procedures To The Letter

Your lender should give you a set of procedures for payments made at closing time. Do not deviate from these instructions.

You should not change the arrangement regardless of what you are told by a third party. Especially one that contacts you and not the other way around.

Scammers may contact you shortly before closing day. They often pretend to be someone from your bank or an agent of the lender. These scammers may try to talk you into ignoring the procedure your lender has given you for rendering your cash to close. 

Never alter the agreed-upon payment method or any other detail until you personally speak to your loan officer. Don’t take information on changes in this area from any other person. You may find the best results happen when you call the bank’s main telephone number and ask to be transferred to your loan officer. Don’t alter the arrangement without doing so.

Joe Wallace - Staff Writer

By Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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About FHANewsBlog.com
FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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