Small Mortgages Are Disappearing, New Report Says

Financing options for buyers of lower-priced homes are limited because mortgages with principal balances of $100,000 or less are becoming increasingly scarce, according to a new Realtor.com report.

Realtor.com said the report finds that small mortgages represented more than 12% of all home loans originated in 2013 and 2014, but less than 3% in 2025 and 2026.

The decline reflects both a shrinking pool of low-priced homes and persistent barriers to originating smaller loans.

In 2013, for example, homes bought for $150,000 or less accounted for 36.7% of home sales. In 2026, however, that share has fallen to 8.8%. Yet small mortgages have declined even faster, Realtor.com noted.

Before the pandemic, the share of homes sold for $150,000 or less was roughly three times the share of mortgages originated for less than $100,000. In 2025 and 2026, that ratio widened to nearly four times, suggesting that frictions related to making small loans have intensified.

“Small mortgages are not simply fading because lower-priced homes are harder to find; the financing itself has become harder to access,” said Joel Berner, Senior Economist, Realtor.com. “When the share of low-priced home sales is roughly four times the share of small mortgages, it points to a market where the costs and complexity of originating a modest loan can stand between buyers and an attainable home. The 21st Century ROAD to Housing Act is an important step toward addressing those barriers by targeting the fixed costs, fee structures and appraisal challenges that can make small mortgages uneconomic for lenders.”

Mortgages Concentrated in Rural Markets

Realtor.com noted that small mortgages are most prevalent in lower-cost and rural areas. In 2025, Iowa had the highest share of small mortgages at 9.6%, followed by Wyoming (8.6%), Mississippi (8.5%), West Virginia (8.2%), and New Mexico (7.7%), Realtor.com reported.

It said the rural divide is especially stark: 7.7% of mortgages issued in rural ZIP codes in 2025 had balances under $100,000, compared with 4.9% in town ZIP codes and just 2.4% and 2.3% in urban and suburban ZIP codes, respectively.

Realtor.com noted that small mortgages represented more than three times the share of all mortgages in rural communities than in urban or suburban ones.

Higher Costs Persist

Borrowers using small mortgages do not appear to present weaker credit profiles, Realtor.com said. The average FICO score among buyers with loan balances under $100,000 was 737 in 2026, essentially in line with the 736 average for all buyers.

Small-mortgage buyers also made substantially larger down payments: a median of 34.4% of the purchase price, compared with 14.6% for all purchases. The median purchase price for homes financed with small mortgages was $109,681 in 2026, up from $89,676 in 2013, Realtor.com noted.

Buyers taking out small mortgages have consistently paid higher mortgage rates than buyers overall, Realtor.com said, including when comparing owner-occupant purchases. Small loans are also increasingly used for investment properties: 20.0% of loans under $100,000 originated in 2026 were for investment properties, versus 6.3% of mortgages of any size.

While 91.3% of all mortgages were intended for primary residences, that was true of 76.0% of small mortgages, Realtor.com said.

“Small-mortgage borrowers are bringing strong credit and significantly larger down payments to the table, yet they continue to face higher rates,” Berner said. “That mismatch illustrates why the economics of a small loan matter: many of the costs to originate a mortgage do not shrink with the loan balance. Making it easier to responsibly originate these loans could help more buyers finance lower-priced homes, particularly in rural communities where small mortgages remain an important part of the market.”

Policy and Supply Solutions

According to Realtor.com, the 21st Century ROAD to Housing Act includes several provisions intended to expand access to small mortgages. It authorizes a four-year FHA pilot program designed to offset fixed costs for small loans, directs study of loan-originator compensation and points-and-fees limits, and includes appraisal-related reforms intended to reduce disproportionate costs and delays for low-balance loans, Realtor.com said.