TY  - JOUR
AU  - LaFayette,William C.
AU  - Haurin,Donald R.
AU  - Hendershott,Patric H.
TI  - Endogenous Mortgage Choice, Borrowing Constraints and the Tenure Decision
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5074
PY  - 1995
Y2  - March 1995
UR  - http://www.nber.org/papers/w5074
L1  - http://www.nber.org/papers/w5074.pdf
N1  - Author contact info:
Donald R. Haurin
E-Mail: haurin.2@osu.edu

Patric H. Hendershott
Fisher Hall
Ohio State University
2100 Neil Avenue
Columbus, OH 43210
Tel: 218/963-1393
Fax: 218/963-9484
E-Mail: hendershott.2@osu.edu
AB  - 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.
ER  -