APR Question on FHA Loan Proposals

[Jason Ligon]

Hello all,

This is my first post on the forum. My wife and I hope to be purchasing our first home within the next few months. We found a mortgage broker and he has come back to us with 3 different FHA loan options. The first option is for lets say $100K at %5.858 APR the second option is for $75K at %6.142 APR and the third option is for $50K at %6.458. I find it puzzling that the APR increases as the amount we would borrow decreases. Is that normal? Is that just the lender trying to make as much money as they can regardless of the loan amount? I would think that because we would be borrowing less, it would be less risk to the bank and we would get the same or lower rate as the highest loan amount of %5.858. Why is the percentage going up as the loan amount goes down? We would ideally like to get as nice a house for as cheap as possible. This almost discourages that idea.