Increasing Availability of Small Dollar Mortgages

Twenty percent of owner-occupied homes in the U.S. are valued below $100,000. These relatively low-cost homes often provide lower-income and first-time homebuyers a critical first rung of America’s wealth-being ladder. And yet, these homes are increasingly inaccessible for these buyers, as traditional mortgage financing on these “small dollar” homes has become harder and harder to access. As a result, many that are in a position to benefit from owning a home are locked out of the market altogether.

On December 5, 2022, the Future of Land and Housing Program at New America and the Center for the Study of Economic Mobility (CSEM) at Winston-Salem State University submitted a joint response to the Federal Housing Administration (FHA)’s Request for Information on ways to facilitate access to small dollar mortgages through single family mortgage insurance programs.

Our joint response was informed by a report exploring the accessibility of small dollar mortgages over the past two decades, nationwide and specifically in a a local housing market—Winston-Salem, North Carolina. Our response focuses on three interrelated challenges in accessing small dollar homes for low-and-moderate income families:

1. The decreasing availability of small dollar mortgage loans for LMI buyers;
2. The catch-22 of mortgage standards--or the relatively strict criteria for loan products designed to meet the needs of lower-income buyers; and
3. The competition with all-cash buyers.