 Endogenous Mortgage Choice, Borrowing Constraints and the Tenure DecisionWilliam C. LaFayette, Donald Haurin and Patric Hendershott No 5074, NBER Working Papers from National Bureau of Economic Research, Inc Abstract: Earlier research has shown that lender income and wealth constraint ratios discourage homeownership. This empirical research has been based on home purchasers using an 80 percent loan-to-value (LTV) fixed-rate conventional loan. Employing the same assumption, we find that the constraints lowered the ownership rate of our 1919 young home purchasers by about 20 percentage points. However, households are not restricted to putting 20 percent down and choosing a fixed- rate loan. When we allow households to select the optimal LTV and mortgage type (adjustable or fixed-rate with Federal Housing Administration (FHA) or conventional insurance), the percentage of our sample that is credit constrained declines from 71 to 49. Moreover, the measured impact on the homeownership rate of the constraints falls to only 4 percentage points. Further, FHA loans are estimated to increase homeownership by only 0.1 to 0.2 percentage points. JEL-codes: G11 R20 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:5074 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC. |
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