Breaking Down Closing Costs: FHA vs. Conventional Loans

What Are Closing Costs — and How Much Will You Pay?

📍 Introduction

One of the biggest surprises for first-time buyers? Closing costs.Whether you're using an FHA or conventional loan, you’ll need to plan for 2%–5% of the purchase price in closing costs — separate from your down payment.

Here’s what those costs cover, how they differ by loan type, and tips to reduce them.

🧾 What Are Closing Costs?

These are the fees and expenses paid at the end of the home purchase process — typically due at closing.

They include:

Cost Type	What It Covers
📝 Loan Origination	Lender processing + underwriting fees
🏦 Appraisal	Property valuation for lender
🏠 Title & Escrow	Title insurance, settlement agent
💼 Recording & Transfer	County recording and tax fees
🔐 Prepaids	Property taxes, insurance, HOA dues
💲 Mortgage Insurance	(If required, upfront premium)

💰 FHA vs. Conventional: Closing Cost Differences

Feature	FHA	Conventional
Down Payment	3.5% min	3%–20%
Upfront Mortgage Insurance	Yes (1.75% of loan)	Sometimes (LPMI)
Monthly Mortgage Insurance	Always	Only under 20% down
Seller Contribution Limit	6%	3% (if <10% down)
Typical Closing Costs	~3.5%–5%	~2%–4%

FHA loans often have higher total closing costs upfront, but more flexibility on credit and gift funds.

💡 Can You Reduce Closing Costs?

Yes! Here's how:

• Negotiate seller credits (especially in buyer’s markets)

• Use a lender offering lender-paid credits

• Compare multiple lenders for the best origination fees

• Ask about discounted title and escrow packages

• Roll some costs into the rate (known as “rate buydown”)
  

💬 Final Thought

Closing costs are part of every home purchase — but they don’t have to be a mystery or a dealbreaker. With a smart strategy and the right lender, you’ll know exactly what to expect and how to minimize surprises.

📞 Want help estimating your total out-of-pocket costs? We’ll build a custom breakdown based on your loan type and price range. 👉 Request a Closing Cost Estimate Or reply with your budget — we’ll send a tailored estimate your way.