The High Cost of Small Mortgages: Loans Under $100K Are Hard to Find, Says Realtor.com

A new Realtor.com study sheds light on the difficulties homebuyers face in financing affordable properties as it’s become increasingly difficult to get a small mortgage – defined as a loan with a principal balance of $100,000 or less.

Small loans made up over 12% of all mortgages in 2013-14. By 2025-26, that figure plunged to under 3% – and it’s not just because home prices have risen significantly in that time: “the financing itself has become harder to access,” says Joel Berner, senior economist at Realtor.com.

In 2026, 8.8% of all homes were selling for $150,000 or less, compared with 36.7% of homes in that price range in 2013. In other words, while fewer properties are selling for under $150,000 now, the financing gap that exists for lower-priced properties has widened at a faster pace.

Here’s why it’s increasingly difficult to obtain a small mortgage and what you can do to get a home loan under $100,000.

Buyers often run into issues trying to get a loan under $100,000, Berner says. “Many lenders have minimums, meaning they simply won’t write small loans because the fixed costs of origination and service are too high to make it worth their while.”

For a loan to be considered a qualified mortgage eligible for sale to Fannie Mae and Freddie Mac, the origination charges are capped at 3% of the total loan amount for loans greater than $137,957 and 5% for loans up to $82,774, with a fixed dollar cap for loans within those limits. The cap includes lender fees for underwriting and processing the loan, as well as discount points used to buy down the mortgage rate.

For a larger mortgage, that number can make financial sense for a lender. On a small loan, the cap is less than lenders would otherwise like to charge on a per-loan basis for the costs required to originate it. On a $100,000 loan, the cap is $4,139 – which may not leave enough room for loan officer compensation after mortgage rate buydowns are considered, especially in a high-rate environment.

With many lenders unwilling to issue small mortgages, borrowers are often left with less favorable loan options. They might turn to nonqualified mortgage loans, or non-QM loans, which are ineligible for purchase by Fannie and Freddie and come with higher risk – and higher interest rates to compensate for it.

When a borrower is able to find a small mortgage, the loan might come with outsized costs relative to the amount being borrowed.

In 2026, small mortgages come with an interest rate premium of 33 basis points – or a third of a percentage point – compared with higher-value loans. In today’s environment, that might be a rate of 7.83% on a small mortgage versus a 7.5% rate otherwise. It may seem small, but even a small difference in the loan’s interest rate will make a big difference over the repayment term.

The higher rates come despite the fact that small-loan borrowers have similar credit profiles relative to mortgage borrowers as a whole at 737, on par with the national average of 736. Additionally, small-mortgage borrowers put down a median down payment of 34.4%, more than double the overall 14.6% median among all borrowers.

That interest rate premium has also increased over time. In 2023, when rates were even higher than they were earlier in 2026, small-mortgage borrowers paid a rate that’s 22 basis points higher than the industry average. In 2013, the gap was only 11 basis points, although rates were lower than today.

Beyond higher rates, the costs of a small loan are often disproportionately higher, Berner says.

Lenders “who do offer small mortgages often charge fees that make up a larger percentage of the loan balance relative to higher-dollar loans, making small mortgages more costly even without a higher interest rate.”

While historically it has been difficult to obtain a small mortgage, change is on the horizon. The 21st Century Road to Housing Act, which became law in July without President Donald Trump’s signature, includes provisions aimed at making it easier for homebuyers to get a mortgage of $100,000 or less.

As a result of the legislation, the Federal Housing Administration will run a pilot program aimed at offsetting the costs of small mortgages through lender incentives, borrower fee assistance and increased flexibility for FHA underwriting terms.

Additionally, the Consumer Financial Protection Bureau will revisit the caps on fees and discount points in order for a loan to be sold as a qualified mortgage to Fannie and Freddie.

The act also tackles housing affordability challenges on the supply side by removing barriers to constructing manufactured housing. The end result could help create more affordable housing and expand financing options for these lower-priced homes.

The intended effects of the 21st Century Road to Housing Act may not be felt just yet. It will take time for the industry to adapt to these changes, both on the home construction front and the mortgage financing side. Still, those who need to borrow a small mortgage in the meantime do have options.

“People who need a small mortgage may have the most luck with community banks, credit unions and local housing finance agencies rather than large traditional lenders,” Berner says. “Contacting a HUD-approved housing counselor is a great first step they could take to find out what’s available to them.”