Determinants of the Type of Mortgage: Conventional or Federally Guaranteed Mortgage (FHA or VA)

The purpose of this study was to examine the determinants of the type of mortgage that households obtain: a conventional mortgage or a federally guaranteed mortgage, using the 1998 Survey of Consumer Finances. Based on the models of mortgage choice by Hendershott, LaFayette and Haurin (1997) and Gabriel and Rosenthal (1991), the study examined demographic, economic, and credit management factors. The results of logistic regression showed that households headed by individuals who were younger, less well educated, non-white, with low income, a higher debt-to-assets ratio, and a higher loan-to-value ratio were significantly more likely to obtain a federally guaranteed mortgage. Implications for consumer educators and financial advisors are presented.