The Effect of Down Payment Assistance on Mortgage Choice

Bree Lang and Ellen Hurst ()

The Journal of Real Estate Finance and Economics, 2014, vol. 49, issue 3, 329-351

Abstract: Lack of wealth for a down payment is one of the most recognized barriers to home ownership. In response to this barrier, state and federal government have implemented many programs that provide down payment assistance to potential home buyers. Numerous studies have shown that this assistance can increase homeownership rates, but few have measured how receiving assistance may alter borrowing behavior. Using data from a down payment assistance grant in the Midwest, this study compares the loan type and size of grant recipients to other borrowers that report similar income and buy homes in the same census tract. Results indicate grant recipients are more likely to use conventional loans, which are less expensive than other loan types that require a smaller down payment. Estimates also suggest that the grant may reduce loan size for borrowers who are on the margin of using a conventional loan. Copyright Springer Science+Business Media New York 2014

Keywords: Mortgage subsidies; Down payment assistance; Mortgage size; Borrowing behavior (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jrefec:v:49:y:2014:i:3:p:329-351

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DOI: 10.1007/s11146-013-9432-1

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The Journal of Real Estate Finance and Economics is currently edited by Steven R. Grenadier, James B. Kau and C.F. Sirmans

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