A recent study from the National Association of Realtors and nonprofit American Student Assistance showed that mounting student loan debt is holding Millennials back from buying homes – for seven years. But one homebuilder is trying to make that seven-year delay go away.
Eagle Home Mortgage, a mortgage lender and a subsidiary of Lennar, announced Tuesday that it is rolling out a new mortgage program that will help homebuyers pay off their student debt.
For many Millennials, the issue of student loan debt is a significant impediment to buying a home.
The NAR study showed that only 20% of Millennial respondents own a home, while the majority of them carry an average student debt load of $41,200, which is more than their average annual income of $38,800.
Among the Millennials surveyed who do not own a home, 83% said that their student loan debt affected their ability to buy. The median amount of time Millennials expect to be delayed from buying a home is seven years, while 84% expect to put off buying a home for at least three years.
Eagle Home Mortgage’s loan program targets those very same Millennials and aims to remove the student loan debt from the equation; some of it, at least.
Eagle Home Mortgage's Student Loan Debt Mortgage Program offers borrowers as much as $13,000 that can be used to pay off student loan debt.
But the program isn’t without its conditions.
Borrowers who used Eagle Home Mortgage’s Student Loan Debt Mortgage Program can direct up to 3% of the purchase price to pay their student loans, but only if they buy a new home from Lennar.
Lennar contributes the 3%, which, according to the company, does not increase the price of the home or add to the mortgage balance.
Borrowers must meet credit and income requirements when using the Student Loan Debt Mortgage Program, and can also qualify for loans with down payments as low as 3%.
And now for the fine print.
According to Lennar, the homebuilder will contribute up to 3% of the purchase price of a new home to be used to pay down student loans incurred while attending universities, colleges, community colleges, trade schools and other certificate-granting programs.
The program is not intended for parents who took out loans to finance a their child’s education, Lennar said.
The program’s maximum loan amount is $424,100, but Lennar said that in addition to the 3% contribution to student loan balances, buyers may also be eligible for other incentives – such as credits toward closing costs.
According to Eagle Home Mortgage, the Student Loan Debt Mortgage Program is being offered on a trial basis with new Lennar homes nationwide.
“Americans are more burdened than ever by student loans, with $1.3 trillion in outstanding student loans spread out among 42 million borrowers,” Jimmy Timmons, president of Eagle Home Mortgage, said in a release. “Particularly with millennial buyers, people who want to buy a home of their own are not feeling as though they can move forward. Our program is designed to relieve some of that burden and remove that barrier to owning a home.”
The Lennar program comes as lenders and those who buy their loans look for ways to turn student loan-burdened consumers into mortgage borrowers.
Earlier this year, Fannie Mae unveiled a significant expansion of its student loan cash-out refinance program and introduced new policies to help borrowers with student loan debt get qualified for mortgage loans.
The new student loan cash-out refinance option expands on a program Fannie Mae rolled out with SoFi in November 2016.
Now, Lennar and Eagle Home Mortgage are trying out their own student loan program.
“Lennar is proud to offer this unique and groundbreaking program to our buyers,” Jon Jaffe, chief operating officer of Lennar, said.
“From our signature Everything’s Included program to loans that address the concerns of today's buyers, Lennar is committed to helping families realize the dream of owning their own home,” Jaffe said. “Education is an investment in yourself and your community – and Lennar wants to help ensure that college loans don't unnecessarily stand in the way of homeownership.”