Denials for Small-Dollar Mortgages Are on the Rise

Over a quarter of all U.S. home sales are for homes priced below $100,000, but according to CNBC, just 23.2% are purchased using a mortgage compared with 73.5% of homes priced at or above $100,000. Because small-dollar mortgages aren’t as profitable, their denial rates are much higher than denials for larger loans, meaning that those buying houses with smaller mortgages are struggling to find lenders.

From 2011 to 2021, the value of mortgage loans between $10,000 and $70,000 dropped by over 53%, while the value for those between $70,000 and $150,000 dropped by more than 21%. During the same period, the value for loans exceeding $150,000 rose by over 240%.

“One barrier for small-dollar mortgages is that it’s just not as profitable for lenders to do them,” according to Janneke Ratcliffe, vice president of the Housing Finance Policy Center at the Urban Institute. “Lenders get all their fees and interest based on the loan amount so they’re going to get a lot less revenue on a $70,000 mortgage than they are on a $700,000 mortgage.”

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