Conventional Loan Closing Costs vs. FHA: What to Expect in Johnson County

Navigating the closing costs of a mortgage is one of the most stressful parts of buying a home. For buyers in Johnson County, Kansas, the choice between a Conventional loan and an FHA loan can significantly impact the amount of cash you need at the closing table, as well as your long-term monthly payment.

While both loan types have a similar roster of third-party fees (like appraisal, title, and escrow), the structure of mortgage insurance and upfront fees is where these two products diverge dramatically, directly affecting your cash-to-close amount.

For a full list of local lenders who can guide you through these cost differences, visit our resource on our Mortgage Broker Overland Park page.

1. The Core Closing Cost Components

Regardless of whether you choose a Conventional or FHA loan, you will generally be required to pay a total closing cost amount that ranges from 1% to 2% of the home’s purchase price in the greater Kansas City metro area, which includes Johnson County.

This fee percentage covers the common costs that are present in virtually all home purchases:

• Lender/Origination Fees: Application, underwriting, and processing fees charged by your mortgage lender.

• Third-Party Fees: Appraisal, title insurance, title search, attorney/settlement fees, and credit report.

• Prepaid Items: Initial deposit into your escrow account for property taxes and homeowner’s insurance (required in Kansas) and prepaid interest.

2. FHA Loan: The Upfront Cost Difference

The FHA (Federal Housing Administration) loan is government-backed and designed for buyers with lower down payments (as little as 3.5%) or lower credit scores. While they make qualifying easier, they have a key closing cost component that Conventional loans do not:

The Upfront Mortgage Insurance Premium (UFMIP)

FHA loans require an Upfront Mortgage Insurance Premium (UFMIP) equal to 1.75% of the loan amount.

• Example: On a $400,000 loan, the UFMIP is $400,000 times 0.0175 = $7,000.

This UFMIP is a mandatory closing cost, though most buyers choose to finance it by rolling it into the total loan amount. While this reduces the cash needed at closing, it increases your total debt and you pay interest on it over the life of the loan.

The FHA Closing Cost Advantage: FHA rules allow sellers to contribute up to 6% of the purchase price toward the buyer’s closing costs. This is a higher concession limit than conventional loans allow for low-down-payment buyers, potentially helping you pay off those high upfront fees.

3. Conventional Loan: The Insurance Trade-off

Conventional loans are not government-backed. They generally require a higher credit score (typically 620+) but offer an escape route from mortgage insurance.

Private Mortgage Insurance (PMI)

If your down payment is less than 20% on a Conventional loan, you will pay Private Mortgage Insurance (PMI), but it has two key differences from FHA’s mortgage insurance:

1. No Upfront Cost: Conventional loans do not have an upfront mortgage insurance premium like the FHA’s UFMIP. This immediately lowers your total cash needed at closing by a significant margin (e.g., that $\$7,000$ UFMIP is avoided).

2. Cancelable: PMI can be canceled once your home equity reaches 20%, whereas the annual FHA MIP often remains for the life of the loan unless you refinance.

The Conventional Closing Cost Disadvantage: Conventional loans have stricter limits on how much the seller can contribute toward your closing costs when you put down less than 10%. With a minimum 3% or 5% down payment, the seller concession limit is typically restricted to 3% of the sales price.

Comparative Breakdown: FHA vs. Conventional Closing Costs

Feature	FHA Loan	Conventional Loan (less than 20% down)
Upfront Mortgage Insurance	YES: 1.75% of the loan amount (UFMIP)	NO: No upfront mortgage insurance fee
Monthly Mortgage Insurance	YES: Annual MIP (usually for life of loan)	YES: PMI (cancelable at 20% equity)
Seller Concession Limit	Up to 6% of the sales price	3% to 6% (varies by down payment size)
Total Cash at Closing	Higher due to UFMIP, unless UFMIP is financed	Lower cash needed at closing by default

Which Loan Is Cheaper at Closing in Johnson County?

For the majority of borrowers in Johnson County, the Conventional loan will require less cash at closing because it avoids the mandatory 1.75% Upfront Mortgage Insurance Premium (UFMIP).

However, the FHA loan can become cheaper at closing if you negotiate the maximum 6% seller contribution and use it to cover nearly all your closing fees, including the UFMIP (if you pay it out-of-pocket).

Your best choice depends on your financial profile:

• Choose FHA if: Your credit score is lower, or you absolutely need the seller to pay the maximum amount of your closing costs.

• Choose Conventional if: You have a strong credit score and prioritize a lower amount of total cash needed at closing, with the long-term goal of canceling mortgage insurance.

For personalized advice on which loan is the most cost-effective for your specific home purchase in Johnson County, contact a trusted local mortgage professional.

Other Resources

• Overland Park Mortgage Broker
• FHA Loans in Overland Park Kansas
• Refinance in Overland Park
• First-Time Home Buyer Loans in Overland Park, KS