LORAIN, Ohio — It took Morisa Ivory two years of searching – and a lot of faith – to find a house.
She and her children were living in a two-bedroom apartment on Cleveland’s West Side, not far from her job. Then the rent started to jump, from $700 to $1,000 a month.
That’s when Ivory began her quest to become a homeowner.
“I knew I wanted a house,” she said. “And I knew the rent wasn’t gonna go down. So … I had no other choice, honestly, but to take that risk.”
Her aspirations were modest. So was her budget, as a working mom with four kids. She started out looking at homes priced around $40,000. As she got promotions and raises at work, she considered properties listed for as much as $85,000 or $90,000.
But at that low end of the market, it’s not easy to get a mortgage.
“I could go through all the steps that they’d require and then get denied at a very sensitive spot. And no explanation,” Ivory said.
Across the country, researchers and consumer advocates say it’s almost impossible to get a home loan for less than $100,000. Yet real estate listings show there are thousands of low-cost homes for sale in Ohio, particularly in cities and rural communities.
“There are still a lot of houses below the hundred-thousand-dollar mark across the Midwest. In places in the Southeast,” said Sarah Mancini, managing director of advocacy for the National Consumer Law Center, a nonprofit focused on consumer protections.
“Unfortunately, many of those homes are being snatched up by investors who can pay cash because it’s so hard to get a mortgage loan,” she said.
Small-dollar loans require as much work as larger mortgages, with lower rewards for banks and loan officers, according to reports from the Urban Institute, the Pew Charitable Trusts, the National Consumer Law Center and other organizations.
“Run-of-the-mill, profit-driven lenders, they’re not very interested in this business,” Mancini said. “And they will often say ‘we don’t make loans below that amount.’”
And there are other hurdles.
Many banks and mortgage companies sell their loans to government-sponsored mortgage giants Fannie Mae and Freddie Mac. That allows them to free up cash to make more loans. But Mancini said it’s hard for lenders to meet the volume thresholds to participate in the secondary market if they’re making smaller loans.
“There’s just so many aspects of this business model that are more challenging with smaller loans,” she said.
'A crucial foothold'
Lauren Molnar has seen that firsthand. She worked in mainstream lending for years before joining Believe Mortgage, a nonprofit lender based in Cleveland.
The company is an arm of CHN Housing Partners, a nonprofit focused on providing affordable housing and building paths to ownership. CHN launched the Believe Mortgage program in 2021 to fill gaps in the market. Since then, the lender has provided mortgages for approximately 160 buyers.
Most of them, like Ivory, are first-time homeowners – though that’s not a requirement. The vast majority of the borrowers are Black or Latino. And many of them are single moms.
“We don’t say ‘goodbye, see you later, like a traditional lender,’” Molnar said.
Believe Mortgage can lend on homes priced as high as $800,000. But that’s not the typical transaction. “We can go as low as $20,000 for a purchase price,” Molnar said. “And believe it or not, I’ve actually done that on more than one occasion.”
Buyers can have a down payment as low as 3% of the home price. They don’t have to pay for private mortgage insurance, which mitigates risk for lenders. And Believe Mortgage will consider applicants with credit scores as low as 570, Molnar said.
The program also provides homeownership counseling and other support.
“We don’t have many programs like that around the country. It’s hard to find them,” said Mancini, adding that nonprofits and community-focused lenders are the most likely organizations to offer small mortgages.
She believes incentives for lenders – and changes in laws – might be what it takes to get more money flowing.
“This is the beginning,” she said of relatively inexpensive houses. “This is sort of the starter home or the pathway into being a homeowner for many people. … It’s really a crucial foothold on financial stability and a pathway to the middle class.”
'The ups and downs'
After Ivory hit a wall, Believe Mortgage opened a door.
The hands-on, patient process appealed to her. She was navigating an intimidating process for the first time, on a tight budget, in a fiercely competitive environment.
“It takes a lot of resiliency for anybody in the housing market right now,” Molnar said.
Ivory toured dozens of homes while juggling her family and a full-time job. She had a hard time competing with investors, who didn’t need a loan and could move a lot faster.
Some of the houses were in rough shape. That’s another hurdle for buyers near the bottom of the market, Molnar said. Many houses need significant repairs.
Or they appraise for less than the proposed price, putting the buyer in the position of having to negotiate a discount or come up with more cash.
“You go through the dips. The ups and downs,” Ivory said. “Yeah. You definitely do.”
Mancini has talked to lawyers across the country who don’t have anywhere to send clients who need a mortgage of $80,000 to $100,000. She’s encountered renters who were so desperate to become owners that they entered risky agreements, including contracts for deed where the seller holds title to the home until the borrower makes all the payments.
“Rents are so high right now in many places,” she said. “It is more affordable to own a home – if you could just get that mortgage.”
Ivory never gave up. Neither did her real estate agent.
“Even when we’d go into a home and it would have a smell or it was scary looking, she’d still walk out of the house and say ‘You know what? Tomorrow we have another house to look at,” Ivory said. “We wouldn’t even dwell on how bad or how damaged the house looked, or the circumstances.”
Eventually, she landed in Lorain, buying a three-bedroom house for $30,000 – with a loan of just over $29,000. The property was a former rental owned by CHN, which sells homes at below-market prices.
“On the day Morisa closed, I called her,” Molnar said. “I was so excited. … She did an amazing job throughout the process. She’s a pretty incredible human.”
The house doesn’t have a basement or a porch that Ivory once imagined. But her kids – Amelia, Luka, Charlie and Gianna – finally have a backyard to play in.
The children, ages 3 to 7, love scooting up and down the stairs.
For Ivory, the best part is having two bathrooms.
“If I would have known that is … what’s giving me the most joy, I probably would have had a house two years ago,” she said, laughing.
Now she’s planning for the future – and feeling much more secure.
“The risk,” she said, “was worth it.”
