Rural homebuyers could find themselves navigating a whole new — and much easier — world within the next few years, due to the 21st Century ROAD to Housing Act. The Act includes a provision that would enable the U.S. Department of Housing and Urban Development (HUD) to create a four-year pilot program that would open the door to better financing for small mortgages of $100,000 or less at origination.
The pilot program, which is outlined in Section 105 of the Act, would encourage small-dollar mortgage lending by enabling direct payments to lenders, reducing Federal Housing Administration (FHA) terms and costs, creating appraisal, down payment, title insurance, and closing cost grants, and providing lender outreach and technical assistance. HUD, if it chooses, has until July 2027 to establish the pilot program and until July 2029 to launch it officially.
Several other Sections — 401, 402 and 403 — outline the Consumer Financial Protection Bureau (CFPB), the U.S. Department of Agriculture (USDA), the U.S. Department of Veterans Affairs (VA), FHA and the Federal Housing Finance Agency’s (FHFA) roles in easing the process for small-dollar mortgage loans. The CFPB will focus on loan originator compensation rules, while other departments will zero in on standards for reviewing borrower requests for reconsiderations of value or second appraisals.
Realtor.com’s Wednesday analysis found that rural communities would receive the greatest benefit from the program, as small mortgages accounted for 7.7 percent of all mortgages issued for homes in rural ZIP codes in 2025.
ZIP codes classified as towns had the second-largest share of small mortgages at 4.9 percent, followed by urban (2.4 percent) and suburban (2.3 percent) ZIP codes. On the state level, small mortgages were most common in Iowa (9.6 percent), Wyoming (8.6 percent), Mississippi (8.5 percent), West Virginia (8.2 percent) and New Mexico (7.7 percent).
Small mortgages are also more likely to be used for investment properties, the portal found, noting that the pilot program could encourage more investors to focus on lower-priced homes.
“Twenty percent of loans originated for under $100,000 in 2026 are for investment properties compared to 6.3 percent of mortgages of any loan amount,” the report read. “While 91.3 percent of all mortgages are intended for primary residences, just 76 percent of small mortgage loans are. Encouraging more small mortgages is likely to boost fix-and-flip activity among lower-priced home listings.”
These investors often offer more substantial down payments (34.4 percent) than the typical homebuyer (14.6 percent) and have similar creditworthiness (737 FICO vs 736 FICO), but often receive higher mortgage rates than buyers with larger loans — underscoring the need for the pilot program, despite the share of small-dollar mortgages sliding from 12.9 percent in 2013 to 2.3 percent in 2026.
Although home price growth trends account for some of the decline, Realtor.com said the greater catalyst is the friction in small mortgage origination.
“In 2013, home sales of $150,000 or less made up 36.7 percent of home sales. So far in 2026, that figure is 8.8 percent,” the report read. “From 2013 through 2019, the share of home purchases that went for under $150,000 was about three times the share of mortgages that originated for under $100,000, but this relationship began to shift during the pandemic, and now in 2025 and 2026 the ratio of the two shares is closer to four.”
“This suggests that there are fewer small-dollar mortgages being written in recent years than sales of low-priced homes would suggest and that those structural frictions in originating small loans have become more pronounced since the pandemic,” it added.
Beyond the 21st Century ROAD to Housing Act, legislators are looking to update the Dodd-Frank Act and the Basel III accord, both created in the aftermath of the 2007-2008 financial crisis. Republicans say both regulations have pushed smaller, community-oriented banks to the sidelines, even though they may be better equipped to handle small-dollar mortgages. Democrats are more split on revisions, with moderates often voting with Republicans to ease regulations.
“You’re talking increasing housing supply is critical,” Rep. French Hill (R-AR) said of the decisions that Congress must make. “Well, finance is part of that.”
