HECM for Purchase Closing Costs: The Itemized Breakdown

A HECM for Purchase (H4P) typically closes with $8,000 to $25,000 in costs on top of the down payment. The two biggest line items are the FHA upfront mortgage insurance premium (2% of the maximum claim amount) and the lender's origination fee (capped by HUD formula at $6,000). The rest (counseling, appraisal, title insurance, recording, third-party services) runs $2,000 to $4,000 in most markets. Closing costs can be financed into the loan; the down payment cannot. Below is each line item, the federal rule behind it, and a worked example on a $400,000 purchase.

Last reviewed 2026-05-20

What are the closing-cost line items?

The line items are UFMIP, the origination fee, counseling, appraisal, title insurance, recording fees and transfer taxes, and other third-party services. The cost structure is the same as a HECM refinance, with one purchase-specific addition (the cash-to-close down payment). Each line item below cites the federal rule that governs it.

Upfront mortgage insurance premium (UFMIP), 2.0% of the maximum claim amount. The maximum claim amount is the lesser of the home's appraised value and the FHA HECM lending limit ($1,249,125 for case numbers assigned on or after January 1, 2026; $1,209,750 for 2025 case numbers). On a $400,000 purchase, UFMIP is $8,000. It is paid at closing and funds the FHA insurance protection on the loan. (HUD Mortgagee Letter 2017-12; HUD Mortgagee Letter 2025-22)

Origination fee, formula-capped at $6,000. HUD caps the HECM origination fee at 2% of the first $200,000 of the maximum claim amount plus 1% of the amount above $200,000, with a $6,000 ceiling and a $2,500 floor. On a $400,000 MCA: 2% × $200,000 + 1% × $200,000 = $6,000. On a $200,000 MCA: $4,000. On an $80,000 MCA: $2,500 (the floor). (24 CFR 206.31(a); HUD Handbook 4000.1, Section II.B.10.b)

Counseling fee, typically $125 to $200. Every HECM borrower has to complete a session with a HUD-approved counselor before the lender can pull an FHA case number. The fee is paid to the counseling agency, not the lender. Some agencies waive the fee below an income threshold; HUD does not let the lender pay the fee directly. (24 CFR 206.41)

Appraisal, $500 to $900. An FHA roster appraiser values the home being purchased. Manufactured homes and rural properties run at the higher end. A second appraisal is sometimes required (a "collateral risk assessment"); when one is, the borrower pays for both.

Title insurance, varies by state and price. Lender's title insurance is required; owner's title insurance is optional but commonly purchased. On a $400,000 purchase, lender's plus owner's title runs roughly $1,200 to $2,500 depending on state rates.

Recording fees and transfer taxes, varies by jurisdiction. Recording the deed and the mortgage costs $50 to $400 in most jurisdictions. Some states and municipalities also charge a real-estate transfer tax of 0.1% to 2.0% of the purchase price; on a $400,000 home in a high-transfer-tax state, this can add $2,000 to $8,000.

Other third-party services, $500 to $1,500. Flood certification, credit report, lender's attorney review, settlement-agent fee, courier and wire fees.

What is, and is not, financeable?

Most closing costs can be financed (added to the principal limit utilization at closing). UFMIP and the origination fee always are; title, recording, and counseling typically are. The borrower's cash-to-close therefore has two pieces: the down payment (always cash, never financeable) and any closing costs paid in cash rather than rolled into the loan. Financing the costs increases the day-one balance; paying them in cash keeps it smaller. Either is allowed.

The down payment is set by the HECM math. The principal limit (calculated from the borrower's age, the home's value, and the current expected rate) is the maximum the loan can contribute toward the purchase; the down payment is the gap. The H4P calculator estimates it.

What does a $400,000 HECM for Purchase cost?

A 70-year-old buyer purchasing a $400,000 primary residence with H4P. Assume the principal limit before costs is roughly $190,000.

| Line item | Amount | |---|---| | Upfront MIP (2.0% × $400,000 MCA) | $8,000 | | Origination fee (capped: 2% × $200k + 1% × $200k) | $6,000 | | Appraisal | $700 | | Counseling | $150 | | Title insurance (lender + owner) | $1,800 | | Recording fees | $200 | | Other third-party services | $900 | | Total closing costs | $17,750 |

The buyer's cash to close on this transaction:

| Element | Amount | |---|---| | Purchase price | $400,000 | | Less: HECM principal limit available | ($190,000) | | Less: closing costs financed into the loan | ($17,750) | | Subtotal (the gap the buyer covers in cash) | $227,750 | | Plus: closing costs paid in cash (in this scenario, $0; all financed) | $0 | | Total cash to close | $227,750 |

The buyer brings $227,750 to closing. The closing costs were financed, so the day-one loan balance is $190,000 (principal limit utilization to fund the purchase) plus $17,750 (financed closing costs), roughly $207,750. From there, the loan accrues interest plus the 0.5% annual MIP for the life of the loan.

The same buyer could pay the $17,750 in cash at closing instead. The day-one loan balance would then be roughly $190,000, and the cash-to-close $245,500. Either choice is allowed.

How does H4P cost compare to a HECM refinance?

The cost structure of an H4P is identical to a HECM refinance with one exception: the H4P has a down payment (the gap between the principal limit and the purchase price); a HECM refinance does not. The UFMIP, origination cap, counseling fee, appraisal, title, and recording all calculate the same way.

For the broader picture of when H4P fits, see HECM for Purchase. For the eligibility rules common to all HECM products, see reverse-mortgage requirements.

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