Housing Affordability Is a Big Problem. Small-Dollar Mortgages Could Help.
In many smaller, mid-size cities where home prices are lower, families often have the stable income needed to support homeownership. Yet many families in these more affordable communities aren’t able to buy an affordable home because they can’t access a mortgage, and they don’t have the cash to buy the home outright.
In 2018, there were more than 700,000 homes sold for $85,000 or less across the country. Our research has shown that homes in this price range are significantly less likely to be financed with a mortgage than higher-prices homes.
Limited financing options for lower cost homes adds a huge barrier to families who could otherwise afford these homes. Lender economics are tricky at this price point—high fixed costs and reduced revenue over the life of the loan make it harder to make a profit.
What happens instead? Those who can make an all-cash purchase, often investors, buy the home. Families may also turn to riskier seller financing vehicles like land contracts, which often have fewer borrower protections than mortgages and offer no wealth building opportunities.