As long as we’ve heard rumors of a Verizon iPhone, we’ve also heard rumors that a lighter, smaller, cheaper iPhone was in the works behind closed doors in Cupertino. Sticking to the theme of constantly rehashing rumors until they come true, The Wall Street Journal reported over the weekend that Apple is indeed working on a bite-sized iPhone that will soon become a reality. Codenamed “N97,” the new iPhone will be half the size of the current model and could be available for as little as $49 on contract. It may include a “voice navigation” feature as well, providing a more flushed-out catalog of voice commands. We’re also starting to see a variety of designers issue mockups of the device, which would certainly shake up the mobile industry and spell further trouble for Apple’s competition. If The Journal’s report is accurate, however, the mockups we’ve seen thus far are likely way off base considering the rumored new iPhone model is said to feature a screen that “goes to all of the edges” of the phone. Finally, it is worth noting that an iPhone of this size would likely have to do away with the iPhone’s current home button configuration, a sentiment in line with our exclusive report from last month.

Read [WSJ report] Read [mockup]