Small Mortgage Loans: Do Lenders Do Them Any More?
Some areas of the country have homes for sale that don’t cost a fortune. In fact, the median sales price of homes in some areas is quite inexpensive – less than $100,000. But borrowers are having a hard time finding lenders who will finance small mortgages. “It is a problem that we will need to do some creative thinking on how to fix,” says Ellen Seidman, senior fellow at the Urban Institute, the housing finance policy center, in Washington, D.C. She and fellow co-worker Bing Bai, research associate, wrote a blog recently from their research titled, Where have all the small loans gone?
“It’s important to know that this trend happened well before 2014 – when all the new rules and regulations were written,” Seidman adds. Getting a mortgage loan for less than $50,000 has become almost impossible, she explains. From 2004 to 2011, only 3-4 percent of mortgages were for less than $50,000, and the number is even lower for 2014.
But many towns, a substantial amount of homes cost $50,000 or less.
In their research, they uncovered certain towns such as Scranton, Penn., and Kalamazoo, Mich., had a large number of homes for under $50,000.
According to Seidman, lenders don’t find these smaller loans attractive. Loan origination fees are mostly fixed and recovered either through the sale of the loan or over time, or through the financing spread and payment for servicing.
However, there is hope if you want a smaller mortgage loan. Here are a few ways to find one when you need one:
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