The Effect of Down Payment Assistance on Mortgage Choice

Posted: 9 Oct 2014

See all articles by Bree J. Lang

Bree J. Lang

University of California, Riverside (UCR)

Ellen Hurst

Xavier University

Date Written: September 24, 2014


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.

Keywords: Mortgage subsidies; Down payment assistance; Mortgage size; Borrowing behavior

Suggested Citation

Lang, Bree J. and Hurst, Ellen, The Effect of Down Payment Assistance on Mortgage Choice (September 24, 2014). Journal of Real Estate Finance and Economics, Vol. 49, No. 3, 2014, Available at SSRN:

Bree J. Lang (Contact Author)

University of California, Riverside (UCR) ( email )

900 University Avenue
Riverside, CA 92521
United States

HOME PAGE: http://

Ellen Hurst

Xavier University ( email )

Cincinnati, OH 45207
United States

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