The Loan Type Closing Cost Comparison
Unique upfront cost by loan type on $350K purchase
| Loan Type | Unique Upfront Cost | Amount (on $350K home, 3.5% down) | Can Be Financed? |
|---|---|---|---|
| FHA | Upfront MIP (1.75% of loan) | $5,862 | Yes — into loan |
| VA | Funding fee (1.25–3.3%) | $4,200–$11,088 | Yes — into loan |
| USDA | Upfront guarantee fee (1%) | $3,415 | Yes — into loan |
| Conventional, <20% down | PMI (ongoing, not upfront) | $75–$250/month | No — ongoing cost |
| Conventional, 20%+ down | None | $0 | N/A |
FHA’s 1.75% upfront MIP, VA’s funding fee, and USDA’s guarantee fee can all be financed into the loan — you don’t pay them from cash at closing. The downside: you pay interest on these fees for the life of the loan. The FHA MIP financed at 6.5% for 30 years costs $12,400 in interest on a $5,862 fee. Often still worthwhile for down payment conservation.
When FHA Closing Costs Make Sense
FHA makes sense when: credit score is 580–679 (conventional requires 620+), down payment is limited (3.5% minimum vs. 5% conventional), or debt-to-income ratio is 45–55% (conventional limits at 43% typically). The upfront MIP and lifetime annual MIP (if under 10% down) are real costs — but access to homeownership at 3.5% down often outweighs them.
The VA Loan: Best Closing Cost Profile for Eligible Buyers
VA loans eliminate PMI entirely (saving $100–$250/month). The funding fee (1.25% first use with 10%+ down; 2.15% first use with 0% down) is the VA’s cost offset for zero-PMI. For veterans with 10%+ service-connected disability rating: funding fee is waived entirely. VA loans also limit what fees the veteran can be charged.
Conventional vs. FHA: The 5-Year Comparison
FHA vs. conventional 5-year mortgage insurance cost comparison on $350K home
| FHA (3.5% down) | Conventional (5% down) | |
|---|---|---|
| Down payment on $350K | $12,250 | $17,500 |
| Upfront mortgage cost | $5,862 MIP (financeable) | $0 upfront PMI |
| Monthly mortgage insurance | $292/month (life of loan) | $189/month (until 20% equity) |
| 5-year MI total | $17,520 | $11,340 |
| Total 5-year advantage | Lower upfront, higher ongoing | Higher upfront, lower ongoing |
Compare Total Costs by Loan Type
Enter your purchase price and loan type to see the full closing cost picture.