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Anything is possible! However, in some areas it actually be very difficult to find a first mortgage that covers a property less than about $80,000. Herein lies a confusing scenario: while you might not think you can afford a home for over $100,000 and thus set your sights on a smaller property, you also notice that many lenders won't finance a first time mortgage of less than $80,000. How can this be, especially considering that smaller homes and inexpensive housing are actually solid real estate investments?

Many lenders tend to shy away from financing small mortgages under the $80,000 to $100,000 mark. Their thinking is basically mathematical the lender stands to gain much more profit on an expensive property than a smaller one. This is also attributed to the fact that new mortgages have fees that are based on a percentage of the loan amount. Earning one percent of a $200,000 dollar is an appealing thought to a lender. On the other hand, 1% on a $50,000 mortgage is substantially less. The total funds generated may not even be enough to cover the lender's expenses, salesperson's commission not to mention profit! Because of these limitations, federal and state laws allow lenders to charge higher fees and interest to finance a first time mortgage on a small property. Even so, many lenders refuse to finance these mortgages because they are, ironically, high cost deals.

There Is Still Hope!

Nevertheless, there are still some options to pursue if you want to invest in a smaller property. Some large institutions will fund small property mortgages at higher cost to the borrower. There are also other financial resources to consider, such as local community banks, credit unions, stock brokerage companies and privately owned lending companies. Smaller or medium-sized local institutions may be more willing to finance first time small balance mortgages because they keep these plans on their own "books", and can earn more interest over a long period of time. It also makes good business sense from the local lender's point of view, to establish a relationship with the borrower so that he or she will opt in for other financial services and products.

Lenders attempt to be fair when dealing with borrowers as far as credit standards go, as well as other qualifications, including debt-to-income ratio. However, lenders may be more sensitive to appraisals, which is a major concern in all home loan financing, particularly if the house is under the very profitable $100,000 mark. If

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