Small Mortgages Are Vanishing Despite Federal Access Push
Loans under $100,000 have dropped from 12% of originations in 2013-14 to under 3% in 2025-26, squeezing buyers of lower-priced homes.
Mortgages with principal balances of $100,000 or less have nearly disappeared from the U.S. lending market, falling from more than 12% of all originations in 2013–14 to fewer than 3% in 2025 and 2026, according to new data released from Austin, Texas. The sharp contraction is narrowing financing options for borrowers seeking to purchase lower-priced properties, even as federal policy continues to target barriers to homeownership access.
The decline raises questions about whether existing policy tools are reaching the buyers they are designed to help. Small-dollar mortgages are disproportionately used by first-time buyers, low-to-moderate income households, and purchasers in rural or economically distressed communities where home prices remain well below national medians. When these loans become scarce, cash buyers and investors often fill the gap, further pressuring affordable inventory.
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Lenders have long cited thin profit margins on small-balance loans as a structural deterrent. Fixed origination and servicing costs mean a $75,000 mortgage generates far less revenue than a $400,000 loan while requiring comparable administrative effort, a calculus that discourages underwriting in that segment regardless of borrower creditworthiness.
The trend underscores a tension at the heart of U.S. housing finance: federal programs aimed at expanding access have not reversed the market forces pushing lenders toward larger, more profitable originations. Analysts note that without targeted incentives or regulatory adjustments specifically tied to small-balance lending, the segment is likely to continue shrinking as home prices rise and the economics remain unfavorable.
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