Applying for an FHA home loan entails paying closing costs that are charged by the mortgage lender and the various other players involved in the loan process. While they’re mostly unavoidable, there are actually ways you can do to somehow lessen the amount you’re going to pay for. Let’s discuss what the closing costs are and are the ways you can alleviate the burden of paying for them.

What Are FHA Closing Costs?

Closing costs actually vary by state and are dependent on the rates imposed by your lender. Here are some of the closing costs you may encounter when dealing with different mortgage lenders:

  • Mortgage Insurance Premium (MIP) – If you applied for an FHA loan and decided to pay less than the 20% down payment, then you are required to pay an MIP upfront. You will also be charged for this annually for the duration of the loan term. The upfront MIP that you pay is already part of the closing costs, equal to 1.75% of your loan principal.
  • Lender Fees – Of course, working with a lender means you’ll have to pay the fees that they charge for the services they provide. This can include an origination fee, an application fee, a document preparation fee, and an underwriting fee. The amount and the fees vary depending on the lender, and some even allow these to be negotiated or even waived.
  • Third-Party Fees – These are basically all the fees charged by other providers involved in the transaction. Third-party fees could cover services necessary to the loan process and real estate sale, such as title search, appraisal, notarization, credit check, deed recording, etc.
  • Prepaids – Prepaids are basically the expenses you pay in advance, some of which are actually shared between the buyer and seller. However, this needs to be negotiated first between the two parties. Prepaids include tax and insurance escrow deposits, flood and hazard insurance premiums, and per-diem interest.

How to Save on FHA Closing Costs

There are several steps you can take to save on these closing costs. While it’s impossible to do away with them completely, the least you can do is reduce the amount you need to pay. Some of the ways you can save include:

1. Comparing Lender Fees

The lender’s fee can be a substantial amount depending on which lender you’re working with. You can effectively save some money by looking for lenders that offer good loan programs with lower lender fees.

2. Rolling the Closing Costs into the Loan

If you want to avoid paying the costs upfront, there’s actually the option of rolling them into your mortgage. This will increase your monthly payments, but at least you don’t have to pay a big amount of money upfront, which is great if you’re short on cash.

3. Asking the Seller to Foot the Bill

With an FHA home loan, you can ask the seller to pay for some of your closing costs to help cut down on expenses. While this is completely possible, very few sellers are willing to do it. But it wouldn’t hurt to try to convince them.

4. Try Looking Into Closing Cost Assistance

In some states, it’s also quite possible to request a grant or zero-interest loan option. This is an excellent way to lessen the load of closing costs and your down payment.


FHA loan closing costs can be quite a heavy burden to borrowers and first-time home buyers. These tips should serve you well and help educate you about what costs to expect and how you can somehow lighten the load of paying them.

Cal Coast Funding is a premier mortgage lender in San Diego, offering loan programs with competitive rates. Our team has more than 20 years of experience in the lending industry and is ready to help you find the perfect mortgage solutions for your needs and budget. Contact us today to apply for a new loan!