How much is the FHA funding fee?

The FHA funding fee is made up of two mortgage insurance costs: first, you’ll pay 1.75% of your loan value (UFMIP) upfront at closing, and then you’ll pay .40–1.05% every year after (MIP). Your MIP will be broken into monthly installments that are added into your mortgage payment.

Is the FHA funding fee refundable?

No, the FHA funding fee is not refundable. The only way to get a refund from your home purchase is to use a home buyer rebate program or refinance your FHA loan into another FHA loan, such as an FHA Cash-Out Refinance or an FHA Streamline Refinance, within three years after closing. Even then, your lender won’t refund you with cash or a check. Rather, the FHA will let you use whatever you’ve paid in UFMIP toward your new loan. So, if you’ve paid $2,000 in UFMIP, you can apply $2,000 against your refinanced mortgage.

Are FHA closing costs higher?

FHA closing costs are higher than closing costs on a conventional loan since you have to pay an upfront mortgage insurance premium (UFMIP) at closing, which is 1.75% of the loan amount. You can roll that cost into the loan or pay it in cash at closing.

Is an FHA loan cheaper than a conventional loan?

No, FHA loans will generally cost you more money over time than a conventional loan because of the extra mortgage insurance you’ll have to pay. Mortgage insurance adds up to thousands of extra dollars paid over time on top of your regular principal and interest payments. While FHA loans may occasionally offer lower interest rates than conventional loans and are easier to qualify for, they don’t give borrowers the option of canceling their mortgage insurance unless you make a 10% down payment. Conventional mortgages, on the other hand, do.

Do all FHA loans have mortgage insurance?

Yes, all FHA loans have both an upfront mortgage insurance premium (UFMIP) and annual mortgage insurance premiums (MIP).

Why do sellers not like FHA loans?

Some sellers may be hesitant about FHA loans because the FHA has notoriously strict appraisal guidelines. The FHA wants to be sure the home you’re buying is safe, sound, and secure. To that end, they may require appraisers to check for defects that a conventional lender might not require. FHA lenders may also refuse to lend money if the home’s appraised value is less than the price the seller and buyer agreed on, which means the sale could fall through and the seller would be back to square one.

Steven Porrello

Contributing Writer

Steven Porrello is a regular contributor at Anytime Estimate. When he's not writing about real estate and investing, Steven spends his time surfing, reading on the beach, and traveling.

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