Mortgage

HereÕ how one student loan lender will get mortgages to millennials

SoFi will use crowdfunding, IPO to grow portfolio

John Burns Real Estate Consulting just quantified the true measure of the student debt burden on the housing economy. The firm estimates it will cost the housing industry approximately $83 billion in sales in 2014. That's in some part due to millennials owing to much on student loans to get a mortgage.

Or at least that's what many think, and one student loan lender believes it can help fill this mortgage gap and get more millennials to buy more homes.

San Francisco-based Social Finance is expanding past its standard student loan refinancing products and moving into the next important stage for financial borrowers, purchasing a home.

The peer-to-peer lender just surpassed $1 billion in crowdfunded loans, making it the fastest marketplace lender to reach this milestone. Other crowdfunding entities are seeing similar success as well. SoFi also announced an Initial Public Offering just this week.

Clearly, there is a growing interest in what this company can do in the mortgage market.

“Many millennials have great career trajectories, but have postponed home ownership because they haven’t been able to save a large down payment,” said Mike Cagney, CEO of SoFi.

“Student debt is certainly one factor, as is the rising cost to own in urban areas like San Francisco, New York, and Boston.  Our marketplace model allows us to provide new alternatives to help people buy a home they love, now,” Cagney added.

SoFi’s mortgages help homeowners in 4 specific ways:

  1. Low down payment options: SoFi offers mortgages with as little as 10% down on loans up to $3 million.
  2. Accessibility for first time homebuyers: Jumbo mortgages and first-time homebuyers are not required to have private mortgage insurance.
  3. Easy pre-qualification: Applicants are able to find out their rates and eligible loan amounts, in less than 24 hours, without completing a full application.
  4. Faster financing: SoFi uses a unique automated valuation model for property appraisals that does not require an in-person appraisal to approve a loan.  Typical applications close in fewer than 21 days, compared to an industry average of 30-45 days. 

However, according to an article in CNBC, SoFi’s target borrower is a millennial with a 780 FICO score and an $180,000 income.     

Peter Renton of Lend Academy said SoFi's venture into mortgages shouldn't cause alarm, because the company is targeting borrowers with little credit history that would otherwise be considered "super-prime."

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