Debt Usage and Mortgage Choice: Sensitivity to Default Insurance Costs / Patric H. Hendershott, William C. LaFayette.

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Hendershott, Patric H

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w5069.Publication details: Cambridge, Mass. National Bureau of Economic Research 1995.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Purchase of a house requires three interrelated household financial decisions: what level of debt to obtain, whether to select an adjustable or fixed rate mortgage (ARM or FRM) and whether to choose an FHA or a conventional loan. While some have analyzed the mortgage debt decision and the ARM/FRM choice, virtually no one has studied the FHA/conventional mortgage choice or the interrelation among the mortgage debt and instrument decisions. In our sample of 819 young home purchasers, debt and mortgage choice is driven by a need to finesse the downpayment and payment constraint ratios and to lower mortgage insurance costs.

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March 1995.

Purchase of a house requires three interrelated household financial decisions: what level of debt to obtain, whether to select an adjustable or fixed rate mortgage (ARM or FRM) and whether to choose an FHA or a conventional loan. While some have analyzed the mortgage debt decision and the ARM/FRM choice, virtually no one has studied the FHA/conventional mortgage choice or the interrelation among the mortgage debt and instrument decisions. In our sample of 819 young home purchasers, debt and mortgage choice is driven by a need to finesse the downpayment and payment constraint ratios and to lower mortgage insurance costs.