It can be challenging to find lenders that offer smaller mortgages because most lenders apply a minimum loan amount of $75,000 to $100,000. In short, lenders prefer larger mortgages because they make more money on closing costs and interest.
Lenders that do offer small mortgages usually charge a higher interest rate and fees to offset the lower loan amount. This creates a challenge for borrowers who want or need a small mortgage because not only do fewer lenders offer them but the loan terms are more expensive.
This is why when you are looking for a small mortgage it is especially important to shop multiple lenders to find the lowest rate and fees. Although the comparison process may be more challenging because the universe of participating lenders is relatively small, there are certain types of lenders you should focus on to make your search more productive.
I recommend that you contact local credit unions, smaller banks and community lending institutions in your area. Community-based lenders, and credit unions in particular, may offer more flexible qualification guidelines and provide the smaller mortgage amount you are seeking.
Again, it may take some extra time and effort to gather and compare multiple proposals but finding the best terms can reduce your monthly loan payment a lower your total interest expense, even for a small mortgage.
The table below shows mortgage rates and fees for leading lenders in your area. We recommend that you contact multiple lenders to understand their minimum loan amount and qualification guidelines.
You can also use the FREEandCLEAR Lender Directory to search over 3,900 lenders by type. For example, you can search for top-rated credit unions in your area to determine if they offer small mortgages.
"Finding and Working With Your Lender." My Home by Freddie Mac. Freddie Mac, 2019. Web.