Small Mortgages Face Financing Hurdles Despite Lower Home Prices

Obtaining a mortgage with a principal balance of $100,000 or less has become significantly more challenging, with financing options becoming scarcer and often carrying higher interest rates, according to a new report from Realtor.com. This trend is occurring even as the availability of lower-priced homes has diminished. In 2013, homes priced at $150,000 or less constituted 36.7% of all sales, a figure that has since fallen to 8.8% in 2026. However, the decline in the origination of small mortgages has been even more pronounced, suggesting that structural barriers within the financing market are disproportionately affecting buyers seeking these smaller loans.

Joel Berner, senior economist at Realtor.com, stated that small mortgages are not simply disappearing because fewer low-priced homes are available. Instead, the financing itself has become harder to access. Berner elaborated that the faster rate of decline in small mortgage originations compared to the sales of corresponding homes indicates a market where the inherent costs and complexities associated with originating a modest loan can prevent buyers from purchasing attainable homes. These barriers are particularly impactful for individuals and families looking to enter the housing market with more affordable options.

Despite these challenges, there is a potential for improvement. The 21st Century ROAD to Housing Act, which became law in July after President Donald Trump declined to sign the bill, aims to alleviate some of the obstacles preventing buyers of lower-priced homes from participating in the market. This legislation includes provisions specifically designed to broaden access to small mortgages. Furthermore, the act seeks to address the fixed costs and delays commonly associated with small loans, which may be limiting activity in this segment of the mortgage market.

Berner highlighted the significance of the 21st Century ROAD to Housing Act, describing it as an important step toward dismantling these barriers. The act targets the fixed costs, fee structures, and appraisal challenges that can render small mortgages economically unviable for lenders. By addressing these specific issues, the legislation intends to make it more feasible and profitable for financial institutions to offer and service smaller loan amounts, thereby improving accessibility for prospective homeowners. The report also touches upon the disproportionate impact on rural America, where the concept of purchasing a home for under $150,000 might seem increasingly distant, especially given the current nationwide median listing price.