Here's why it's so hard to get mortgage loans less than $50k - Workstation Thin Client

Spending most of my life within theexpansive, densely-populated and inflated housing market that isLos Angeles County — namely, the South Bay"s"Beach Cities" — I often forget that half-milliondollar homes are not the norm throughout most of the country.According to Trulia.com, the median value for a single-family homein Los Angeles, California today is $301,146. A few hours away in the more isolated community of Barstow,however, the median value is just $65,000. Homeowners living in small towns or depressed local economies,where property values are quite low, don"t need to borrowhundreds of thousands of dollars to buy property — they onlyneed as much as someone looking to buy a higher-end new car. Then there are those homeowners who may have secured their loans 15or 25 years ago, have paid down most of the principal balance ontheir mortgages, yet want to take advantage of today"samazing mortgage rates by refinancing.

Unfortunately, whether you want to borrow or refinance a mortgageof just $50,000 or less, few lenders are willing to approve it. Why Lenders Don"t Like Providing Small Mortgage Loans So why is it so difficult to find a lender offering small mortgageloans under $50,000 in the first place? Generally, it"s justnot worth it to the bank ( or the borrower, in most cases). That"s because whether your mortgage is for $50k or $500k,loan origination and servicing costs are about the same. A loan ofseveral hundred thousand dollars over couple of decades providesthe lender a nice profit from interest, while a much smaller loanrequiring the same amount of money and effort to fund it yieldssignificantly less.

Often, it"s not cost-effective for a bankto provide such a small home loan. If lenders lose money providing extremely small home loans, theyare certainly not going to go out of their way to advertise theiravailability, much less the higher rates associated with theseloans. That does not mean, however, that there are no lenders outthere who will provide one. How to Get a Small Home Loan and Alternatives for When YouCan"t Just because these small home loans are uncommon doesn"tnecessarily mean they don"t exist. If you need financing fora home that doesn"t cost very much, you might be able to getit if you"re willing to put in the work.

Reach out to Local Banks and Credit Unions Don"t expect to walk into a BofA or Chase mortgage office andbe approved for a $50k mortgage. To find small home loans, you haveto go to small institutions. Your first stop should be your local bank; an existing relationshipwith a community bank or membership with a credit union is a greatin to negotiating a small home loan. Financial institutions aremuch more willing to work with customers who have proven theirloyalty and responsibility with money.

If you don"t bank with a community institution, however, oryou do, but are rejected for a loan, you should continue to meetwith representatives from local banks and CUs near you and havethem review your financial situation (just don"t let them allrun your credit!) to find out if a small mortgage loan is apossibility. Keep in mind, it could take some time before finding alender who is willing to work with you. What to Do When No One Will Give You a Small Mortgage Loan If you"ve tried contacting local lenders without any luck,it"s time to find alternative ways of funding your homepurchase. Personal loans Rather than obtaining a mortgage loan, you can instead finance yourhome purchase using a personal loan. There are many types ofpersonal loans, ranging from secured loans from major banks, todangerous, extremely high-interest payday loans.

Obviously, if youdecide on a personal loan, it"s important that the terms aremanageable and the interest rate is affordable. Peer-to-peer lending Another option is to borrow the money from an individual willing tolend it out-of-pocket in return for interest from you. There are acouple of peer-to-peer lending sites that facilitate these transactions and tend to have positiveuser reviews: Prosper.com and LendingClub.com. P2P lending sites like these are helpful because users (bothinvestors and borrowers) are pre-screened, while the interest ratescharged tend to be more competitive than personal loan rates attraditional financial institutions.

Both of these sites serve asthe middlemen, matching investors with borrowers who meetqualifications, including a credit check. Like any other loan, therate charged for a personal loan will depend on things like yourcredit score, amount borrowed and loan term. It"s importantto note that the maximum loan amount allowed by Prosper is $25,000,while Lending Club funds loans up to $35,000. Why You Should Think Twice About Small Home Loans Note that if you do manage to finance a home with a mortgage loanof less than $50k, the interest rate will most likely be higher tocompensate for the money the lender is losing on the deal.Additionally, while closing costs of, say, $5,000 would beconsidered perfectly reasonable on a standard mortgage, thatrepresents 10 percent of a $50,000 loan — not so reasonableany more. So in answer to Sandy"s challenge, the banks and ratesavailable for mortgages under $50k vary by applicant, and youwon"t find them advertised.

Some lenders outright do notprovide these small mortgage loans, while those who will do so on acase-by-case basis. I would advise anyone seeking a mortgage this small to stop for amoment and really think about whether it"s worth it —it may turn out that securing a mortgage loan for that littledoesn"t make sense financially. If you need a loan for lessthan $50k, consider finding an alternate source of funding, maybeeven borrowing from a family member or friend, or simply waiting onyour purchase so you can save up the money you"d be spendingon mortgage payments and pay cash instead. DON'T MISS: These tiny homes are incredible.

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