Owning a home can be a path to financial security. And small-dollar mortgages valued at $100,000 or less can help people with limited income and savings buy lower-cost homes. Yet, applicants for these loans were about twice as likely to be denied as mortgage applicants overall.

Examining mortgages in Pennsylvania, New Jersey, and Delaware in 2021, the study finds that:

  • Credit history was a more common reason for denial on small-dollar mortgage applications than on mortgage applications overall.
  • Banks originated a greater share of small-dollar mortgages (32–46 percent) than they did mortgages overall (23–33 percent) in the three states.
  • The majority of small-dollar mortgage borrowers had low or moderate incomes: 63 percent in Delaware, 75 percent in Pennsylvania, and 81 percent in New Jersey.

Finding ways to lower lender origination costs and address issues of denial because of credit history could expand access to small-dollar mortgages.

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