Homeownership is the largest source of wealth for most American families, and obtaining a safe, traditional 15-to-30-year mortgage is a key step toward achieving financial security. But outdated housing policies and financial regulations have made small mortgages—those for homes priced under $150,000—expensive for lenders and unavailable for millions of qualified and creditworthy borrowers, especially Black, Hispanic, and Indigenous households and those in rural communities. With limited access to small mortgages, many of these families turn to alternative financing arrangements, which often involve financial risks and lack many of the protections traditional mortgages offer.
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"Alternative financing is pitched as another pathway to homeownership when mortgages are not available, but the reality is many alternative financing borrowers never achieve their goal of owning."
Tara Roche, project director The Pew Charitable Trusts' housing policy initiative
Pew studies the alternative financial arrangements that people use to buy low-cost homes and examines the barriers that lenders face to offering small mortgages in order to inform policymakers and other stakeholders about market practices, evaluate borrowers’ experiences, and promote the availability of safe, affordable home loans.
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Alternative finance
Many homebuyers have used risky alternative arrangements such as land contracts, lease-purchase agreements, and personal property loans in part because they could not find traditional mortgages for homes priced under $150,000.
“Consumers usually pay more, often much more, to use alternative financing than the same consumer would pay in a mortgage.”
Alex Horowitz, project director The Pew Charitable Trusts' Housing Policy Initiative
Small mortgages
Low levels of small-mortgage lending disproportionately affects first-time homebuyers, low-to-moderate-income families, and some communities of color who are more likely than other buyers to purchase low-cost homes and to rely on these loans.
Manufactured Housing
Manufactured homes are an important but underutilized source of low-cost housing for Americans. But a lack of safe and affordable financing for these homes has been a barrier for prospective homebuyers.
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