FHA Loan Down Payment and Closing Costs

Buying a home for the first time is one of the biggest decisions you'll ever make — which is why it's so important to learn about FHA loan down payment and closing costs.

After all, becoming a homeowner is a massive investment, and the journey to homeownership includes all kinds of twists and turns.

In addition to finding a house — and, most likely, a real estate agent to work with — you also have to save up for a down payment and secure a loan to cover the rest of the sale price.

What is an FHA loan?

An FHA loan is a mortgage option designed to help folks with lower income or limited credit access achieve homeownership. Offered by the Federal Housing Administration (FHA), a government agency under the Department of Housing and Urban Development (HUD), FHA loans are insured by the federal government.

FHA loans typically offer much lower down payment requirements. In some cases, you may be able to move into your first home while putting down as little as 3.5% of the purchase price.

How much do you need for an FHA loan down payment?

Most homebuyers who secure traditional loans have to put down anywhere between 10% and 20% of a home's purchase price. FHA loans are much more flexible — in some cases, you may be able to secure a home by putting as little as 3.5% down, or up to 10%.

What are FHA loan closing costs?

Upfront mortgage insurance premium (UFMIP)

The UFMIP serves as an insurance premium to protect the lender in case of borrower default. This one-time payment typically hovers around 1.75% of the base loan amount.

Annual mortgage insurance premium (MIP)

FHA loans often require borrowers to pay an annual MIP, divided into monthly payments. Over time, it may be possible to remove this expense if you build up enough equity (e.g., more than 20%).

Loan origination fees

Lenders may charge origination fees to cover loan processing costs, including charges for underwriting, document preparation, and application processing.

Appraisal fees

The FHA mandates that a local property appraiser comes by the house to determine its market value. These costs usually range between a couple hundred and a thousand dollars.

Title and escrow fees

Closing costs include charges for title searches, title insurance, and escrow services to ensure a smooth and legally sound transfer of ownership.

Home inspection fees

While not always required, FHA borrowers may decide to pay for a home inspection to assess a property's condition.

Frequently asked questions

What credit score do I need to qualify for an FHA loan?

Homebuyers typically need credit scores of at least 580 for a 3.5% down payment. Borrowers with scores between 500 and 579 may still qualify with a 10% down payment.

How big does my FHA loan down payment have to be?

If you have a score of at least 580, you can qualify with as little as 3.5% down. On a $300,000 home, that's $10,500.

Can I get financing for FHA loan closing costs?

Yes, borrowers can choose to roll some closing costs into the overall loan amount. You can also explore seller concessions or lender credits.

Disclaimer: The content provided on this website is offered for educational purposes only. Visitors are advised to consult with qualified experts before making any financial decisions.