Small Mortgages Are Disappearing, Even as Federal Policy Targets Barriers to Access

Small mortgages accounted for 7.7% of rural ZIP-code lending in 2025, compared with 2.4% in urban and 2.3% in suburban ZIP codes.

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Realtor.com (NWS) published a report showing that small mortgages have become less common, limiting financing options for buyers of lower-priced homes. Loans under $100,000 represented more than 12% of originations in 2013–14, versus less than 3% in 2025 and 2026. Homes purchased for $150,000 or less fell from 36.7% of sales in 2013 to 8.8% in 2026.

Small-mortgage buyers had an average credit score of 737 in 2026, compared with 736 for all buyers. Their median down payment was 34.4%, versus 14.6% for all purchases, yet they consistently paid higher mortgage rates. The 21st Century ROAD to Housing Act authorizes a four-year FHA pilot intended to offset fixed costs for small loans, directs study of compensation and fee limits, and includes appraisal reforms intended to reduce costs and delays.

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Share of mortgages under $100,000 has fallen from more than 12% of originations in 2013–14 to less than 3% in 2025 and 2026

AUSTIN, Texas, Oct. 7, 2026 /PRNewswire/ -- Mortgages with principal balances of $100,000 or less are becoming increasingly scarce, limiting financing options for buyers of lower-priced homes, according to a new Realtor.com^® report. 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, homes purchased for $150,000 or less accounted for 36.7% of home sales; in 2026, that share has fallen to 8.8%. Yet small mortgages have declined even faster. 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 has widened to nearly four times, suggesting that the frictions associated with 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."

Small mortgages are concentrated in rural markets

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%).

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. That means small mortgages represented more than three times the share of all mortgages in rural communities than in urban or suburban ones.

Higher costs persist despite strong borrower profiles
The borrowers using small mortgages do not appear to present weaker credit profiles. 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 purchasers also made substantially larger down payments: a median 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.

Still, buyers taking out small mortgages have consistently paid higher mortgage rates than buyers overall, 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.

"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 must work together
The 21st Century ROAD to Housing Act includes several provisions intended to expand access to small mortgages. The law 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.

This report also reinforces the broader need to expand the supply of homes. The Let America Build™ campaign, an industry-wide public awareness campaign, is grounded in a simple premise: if America wants more homes, America must build more homes. Realtor.com^® estimates that the nation faces a 4.03 million-home supply gap. Addressing that shortage alongside barriers to small-dollar lending can help create more pathways to homeownership, especially for buyers seeking lower-priced homes.

Methodology
Mortgage origination data come from Optimal Blue and the Federal Financial Institutions Examination Council (FFIEC) Home Mortgage Disclosure Act (HMDA) data, accessed via the Consumer Financial Protection Bureau's HMDA Platform. Listing data come from for-sale homes on Realtor.com in 2025, using the average of monthly aggregates for the year. ZIP codes are categorized based on RUCA codes from the U.S. Department of Agriculture, household counts, and square mileage provided by Claritas, and pedestrian/public transit scores provided by Local Logic.

About Realtor.com^®
For over 30 years, Realtor.com^® has connected buyers, sellers, and renters with trusted insights, professional guidance and powerful tools to help them find their perfect home. Recognized as the No. 1 real estate site REALTOR® agents recommend, Realtor.com® delivers consumer connections and a robust suite of marketing tools to support business growth. Realtor.com^® is operated by News Corp [Nasdaq: NWS, NWSA] [ASX: NWS, NWSLV] subsidiary Move, Inc.

Media Contact: Mallory Micetich, press@realtor.com 

View original content:https://www.prnewswire.com/news-releases/small-mortgages-are-disappearing-even-as-federal-policy-targets-barriers-to-access-302900435.html

SOURCE Realtor.com

FAQ

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How much has the share of small mortgages fallen in Realtor.com's report?

Mortgages under $100,000 fell from more than 12% of originations in 2013 and 2014 to less than 3% in 2025 and 2026. Over a related period, homes purchased for $150,000 or less declined from 36.7% of sales in 2013 to 8.8% in 2026.

Which states had the highest shares of small mortgages in Realtor.com's report?

Iowa had the highest share of small mortgages in 2025 at 9.6%. Wyoming followed at 8.6%, Mississippi at 8.5%, West Virginia at 8.2% and New Mexico at 7.7%.

What data did Realtor.com use for its small-mortgage report?

Mortgage origination data came from Optimal Blue and federal Home Mortgage Disclosure Act data accessed through the Consumer Financial Protection Bureau's platform. Listing data used Realtor.com homes for sale in 2025, averaged across monthly aggregates for the year.