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There are a number of ways you can pay for the closing costs of your FHA home loan. Closing costs can include any discount points you are paying to lower your interest rate, appraisal fees, property taxes, and other expenses.

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

Different Ways to Pay Your Closing Costs

January 25, 2022

Different Ways to Pay Your Closing Costs
There are a number of ways you can pay for the closing costs of your FHA home loan. Closing costs can include any discount points you are paying to lower your interest rate, appraisal fees, property taxes, and other expenses.

In any article discussing FHA loan closing costs, it’s important to note that the FHA does not allow you to count money paid toward closing as part of the minimum required downpayment of 3.5%. Closing costs are completely separate from downpayment requirements.

One of the ways you can pay closing costs is from your own funds, but your lender may have a preferred delivery method for those funds. That may be in the form of a cashier’s check or some other form of payment.

If your lender requires a wire transfer of any kind, discuss this with your loan officer personally or over the phone--do not make wire transfer arrangements by e-mail, as this is a common tool for scammers involved in certain types of mortgage fraud.

It is true that most people new to the home loan process will expect to have to pay their closing costs in this way--from their own funds. But did you know there are other ways to pay?

Your seller is permitted to contribute up to six percent of the price of the home toward your closing costs. That money can NOT be used as a down payment or as part of it, FHA loan rules permit you to get closing cost money ONLY in this manner.

Seller contributions are often used in situations where the buyer has the advantage--if there are several offers on the home you may not be successful in getting a seller credit. But don’t make the assumption that it’s not available to you. It never hurts to ask!

You can also get a gift of closing cost funds from a friend or family member, but in such cases, the lender is likely to require a gift letter explaining the source of the funds, that the gift does not require repayment, etc. It must be a genuine gift rather than a loan disguised as a gift.

And then there are the state and local downpayment assistance programs that may be offered in your local area. Why do we mention a downpayment program in an article talking about closing costs?
 
Because many of these programs have in the past also offered closing cost assistance and it may be available to you separately from downpayment grants or other assistance.

These programs may have need-based requirements, unlike the FHA loan program, but if you qualify you may be able to use these options in conjunction with an FHA mortgage.

Your seller or real estate agent can give you more information about any available options from the state or local agencies, and you can also call the FHA directly at their toll-free number (1-800 CALL FHA) to request a referral to a local, HUD-approved housing counselor who can help you find the resources you need.

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