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The Effect of Down Payment Assistance on Mortgage Choice

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  • Bree Lang
  • Ellen Hurst

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

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  • Bree Lang & Ellen Hurst, 2014. "The Effect of Down Payment Assistance on Mortgage Choice," The Journal of Real Estate Finance and Economics, Springer, vol. 49(3), pages 329-351, October.
    • Handle: RePEc:kap:jrefec:v:49:y:2014:i:3:p:329-351
    DOI: 10.1007/s11146-013-9432-1
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    References listed on IDEAS

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    2. Danilo Liberati & Valerio Vacca, 2016. "With (more than) a little help from my bank. Loan-to-value ratios and access to mortgages in Italy," Questioni di Economia e Finanza (Occasional Papers) 315, Bank of Italy, Economic Research and International Relations Area.

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