MIAMI–A home building company has introduced a new mortgage program that pays off a significant piece of the borrower’s student loan.
A subsidiary of Lennar Corp., Eagle Home Mortgage, said the new program is aimed at the first-time buyer segment.
“Obviously, there’s a benefit to bringing more people into the home buying market. We’re trying to design something here that supports affordability and creates that path to homeownership,” Doug Cropsey, a senior vice president at Eagle, told the Wall Street Journal.
Under the program, Lennar will make a payment to a buyer’s student loans of as much as 3% of the purchase price, up to $13,000. The contribution doesn’t directly increase the purchase price of the home or add to the balance of the loan, according to the Wall Street Journal.
“The evidence is mixed as to whether student debt is acting as a meaningful barrier to homeownership,” the Journal reported. “Most research suggests there is a much higher barrier for people who take out large loans and don’t finish their degrees than there is for those with debt who earn a degree. Housing observers say that at minimum Lennar’s program could help eliminate the significant psychological barriers that many feel to buying a home and taking on hundreds of thousands of dollars of more debt if they are already deep in the hole after college.”
The Journal pointed to research released by NeighborWorks America, a nonprofit that helps promote access to homeownership, that found that one-in-four Millennials said they have had to delay buying a home because of student debt. Half of Millennials said they worry about their student loans all or most of the time, the research found.
The reporter found that Fannie Mae has agreed to back the loans and will monitor the program to ensure that the value of student-loan payment isn’t included in appraisals of the home, which in turn can help drive up values.
“One other perk for borrowers: Student-loan debt can’t be discharged in bankruptcy unless the borrower files a separate legal action and is able to prove ‘undue hardship,’ a rarely met standard, so getting rid of student debt early is preferable to paying it back slowly,” the Journal reported.