Why Do Millions of U.S. Homebuyers Use Risky Financing Options?

Short video describes challenging path to homeownership

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Why Do Millions of U.S. Homebuyers Use Risky Financing Options?
Why Do Millions of U.S. Homebuyers Use Risky Financing Options?
Why Do Millions of U.S. Homebuyers Use Risky Financing Options?
Short video describes challenging path to homeownership

Homes come in all shapes and sizes—and so do the loans needed to buy them. For many prospective buyers, obtaining a traditional, safe 15- or 30-year mortgage is a key step to achieving financial security and their dream of homeownership. But for borrowers looking to buy a home valued under $150,000, financing can be hard to come by, and the available options are often risky—even for those with good credit.

This video from The Pew Charitable Trusts shows how the scarcity of small mortgages can lead millions of borrowers to seek non-mortgage loans or other risky alternative financing arrangements. Many common alternative options—such as seller financing and rent-to-own—can land buyers in serious legal binds or bury them in debt, often costing thousands of dollars in fees and interest and causing borrowers to pay far more than their homes are worth. Some buyers even sink their life savings into a home they never actually own.

Home Finance
Home Finance
Article

Small Mortgages Are Hard to Get

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Article

In many communities across the U.S., small mortgages—those for less than $150,000—are largely unavailable despite an abundance of homes—and buyers—in that price range. Data suggests that the shortage of small mortgages drives some creditworthy borrowers to riskier, higher-cost alternative financing options.

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Getty
Speeches & Testimony

Expand Access to Mortgages for Low-Income Homebuyers

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Speeches & Testimony

On Oct. 23, The Pew Charitable Trusts sent a letter to the Federal Housing Finance Agency (FHFA) regarding Fannie Mae and Freddie Mac’s proposed 2021 “Duty to Serve” plans. The proposals build on Fannie and Freddie’s work since 2018 related to the Duty to Serve rule, which requires them to improve or create a secondary mortgage market for very low-, low-, and moderate-income families, particularly in the areas of manufactured housing, affordable housing preservation, and rural housing.

Home Financing
Home Financing
Article

Risky Home Financing Options Leave Millions Vulnerable

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Article

Most American homeowners finance their homes using traditional amortized mortgages. However, millions have also used nonmortgage alternative financing arrangements, especially in places with lower-cost homes—those valued below $150,000—where access to traditional mortgages tends to be limited.