According to a new report from the Pew Charitable Trusts, mortgages for buying a home under $150,000 have become "less and less available. Many aspiring homeowners buying homes in that price range are either turning to riskier alternative financing, such as personal property loans, paying cash, or ultimately not buying at all.

The penalty for not being able to easily access these small mortgages is especially paid by people of color, especially those in black, Hispanic, Native American and rural communities, Pew said.

Pew found that about a quarter of homes will sell for less than $150,000 between 2018 and 2021. But only 26 percent of the homes sold in that price range were typically financed with a mortgage, Pew said. By comparison, 71 percent of higher-priced homes were paid for with a home loan.

"Homebuyers seeking loans under $150,000 are often unable to find mortgages because outdated policies make it difficult for mortgage lenders looking to finance low-cost home purchases," Alex Horowitz, director of the Pew Charitable Trusts Housing Policy Initiative, said at a briefing.

According to the Pew report, regulations enacted after the Great Recession aimed at protecting borrowers are one reason why smaller mortgages have become more expensive for lenders. The authors note that some lenders say the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 have increased the cost of originating mortgages because lenders must do more work to verify borrowers' ability to repay and comply with strict compliance requirements.

Getting a mortgage for a cheaper home wasn't always so difficult. Before the Great Recession, smaller mortgages were more common. In 2004, lenders originated 2.7 million mortgages under $150,000 and close to 2.9 million larger mortgages ($150,000 or more), Pew said. But since then, small mortgages have fallen sharply to just 830,000 loans per year.

Between 2018 and 2021, 38 percent of mortgage lenders did not originate a single small mortgage loan.

In addition to homes now being more expensive, Pew said, small mortgages are not popular among lenders - despite the demand - because they are unprofitable for lenders.

"Small mortgages are difficult for lenders to originate due to their relatively fixed costs, but small mortgages generate the least amount of revenue," Horowitz explained, "so lenders have trouble covering their rising origination costs."

But buying a cheaper home isn't impossible.

Matthew Bruckner, an associate professor of law at Howard University in Washington, D.C., recently bought a single-family home in Maryland for about $65,000.

Back in March when he was looking at homes, Bruckner told MarketWatch that he planned to use the cash he invested in the stock market to buy the home, which he intended to use as a residence for his sister.

A third of all homes purchased in April were cash, according to real estate brokerage Redfin.

"Part of the problem with these homes is that a lot of banks have minimum loan limits, so these homes that are under $100,000 seem to be in a weird place where you can't necessarily get a loan," Bruckner explained.

He also wanted to create an LLC to buy the house, rather than buying it in his own name, which made getting a small loan even more difficult." So we decided to pay cash," he added.

Many of the cheaper homes are also older, which means they can present an additional hassle when buyers try to get a mortgage to pay for them. Pew notes this caveat, pointing to evidence that many homes priced below $150,000 are more likely to have structural defects that make it harder to get a mortgage than higher-priced homes.

Ethan Finkelstein, who runs Cheap Old Homes with his wife on Instagram, is familiar with this struggle.

Finkelstein told MarketWatch that many people buying affordable homes will have to get creative with their financing. One of his staffers secured a zero-interest mortgage through a state housing authority for a $78,000 home in Detroit, while another buyer purchased a home in Wheeling, West Virginia, for cash and then paid a deposit on a rehab loan after acquiring the property.

Another staff member purchased two buildings for $99,000 after obtaining a mortgage from a small regional bank with in-house underwriting, Finkelstein explained. The staff member also had to make a 20 percent down payment on the homes.

"The biggest challenge in obtaining financing was getting the bank to appraise the property so that its value was equal to the purchase price," he explained. If the home has a working kitchen, bathrooms, plumbing and heating, buyers have a better chance of using the traditional mortgage financing system to get a low-cost home that can be renovated over time, he added.

Finkelstein and his wife also own two inexpensive homes - they bought their first, a Federal-style farmhouse on 10 acres, for $70,000 in cash, and they are rehabilitating the property in hopes that it will be worth about $500,000. They are also dealing with a second home that they purchased for $27,000. They also carry $20,000 in credit card debt from the cost of materials involved in these restoration projects.

Finkelstein told MarketWatch that many people buying affordable homes will have to get creative with their financing. One of his staffers obtained a zero-interest mortgage through a state housing authority for a $78,000 home in Detroit, while another buyer purchased a home in Wheeling, West Virginia, for cash and then paid a deposit on a rehab loan after acquiring the property.

Another staff member purchased two buildings for $99,000 after obtaining a mortgage from a small regional bank with in-house underwriting, Finkelstein explained. The staff member also had to make a 20 percent down payment on the homes.

"The biggest challenge in obtaining financing was getting the bank to appraise the property so that its value was equal to the purchase price," he explained. If the home has a working kitchen, bathrooms, plumbing and heating, buyers have a better chance of using the traditional mortgage financing system to get a low-cost home that can be renovated over time, he added.

Finkelstein and his wife also own two inexpensive homes - they bought their first, a Federal-style farmhouse on 10 acres, for $70,000 in cash, and they are rehabilitating the property in hopes that it will be worth about $500,000. They are also dealing with a second home that they purchased for $27,000. They also carry $20,000 in credit card debt from the cost of materials involved in these restoration projects.

Bruckner, a university professor, said he purchased a single-family home for $65,000 in Allegheny County, Maryland, through a limited liability company." He added, "The process was incredibly quick and easy because I paid cash.