One of the more common problems young home buyers face these days is student loan debt, which can complicate a mortgage approval (and a successful home purchase).
Lenders are well aware of this, as are home builders and the GSEs (Fannie Mae and Freddie Mac).
To alleviate this issue, they recently eased guidelines related to student loan debt so more young folks can qualify for mortgages.
Now one lender is going a step further by offering to pay off some of your student loan debt if you buy a home from their associated home builder.
Eagle Home Mortgage’s Student Loan Debt Mortgage Program
- Some 44 million Americans have student loans
- With average outstanding debt of $34,000
- Lennar will pledge 3% of the purchase price to pay off that debt
- Making it easier to qualify for a home loan while putting homeownership within reach
Apparently some 44 million Americans have student loan debt, which represents seven out of 10 graduates of both public and private colleges, this according to Fannie Mae.
And these recent graduates have an average of $34,000 in debt thanks to their costly college education.
To ease that burden, home builder Lennar is now offering to direct up to 3% of a home’s purchase price to pay off student loans when a borrower uses their affiliated lender Eagle Home Mortgage.
Put simply, Lennar contributes the 3% and it does not increase the price of the home or add to the mortgage loan balance. Of course, if your mortgage (or home) is more expensive as a result…
Anyway, at closing Lennar will pay down the student loan by the agreed upon amount using proceeds from the mortgage transaction.
Ostensibly, this program is in place to facilitate mortgage qualification. Perhaps these young buyers wouldn’t otherwise qualify for a mortgage (and the home purchase) without the pay down of student loan debt.
It could be just enough to push down their DTI ratio to acceptable levels, making it a win-win for the buyer and the home builder (and its financing arm).
Program Highlights and Requirements
- You need to get your home loan from Eagle Home Mortgage
- And put down at least 3% on the home purchase
- The maximum benefit being offered is $13,000
- So a home purchase of around $433,000 will provide the most debt relief
First off, you still need to meet standard credit and income requirements in order to get a mortgage from Eagle Home Mortgage.
This includes putting down at least three percent of the purchase price on the new home. So don’t expect zero down and student loan relief in one.
Additionally, this program isn’t intended to help parents who may have taken out loans to help their children get through school.
Lennar does offer condos, townhomes, and single-family residences, so prospective buyers do have options in terms of property type. However, my assumption is that the property must be owner-occupied.
There is also a dollar amount maximum of $13,000 in terms of student debt relief, meaning you won’t benefit if you go beyond a purchase price of around $433,000.
The loan amount is also capped at $424,100, the conforming loan limit set forth by Fannie Mae and Freddie Mac.
Along with the 3% in student debt that can be paid off, Eagle Home Mortgage may also offer other incentives like credits toward closing costs.
So if you’re short on cash, you might be able to buy a home for little out-of-pocket, while also getting some relief from your pesky student loans.
The Student Loan Debt Mortgage Program is currently being offered on a trial basis with Lennar nationwide.
As alluded to, do the math to ensure a home purchase from Lennar actually saves you money versus an alternative. Same goes for financing the mortgage with their in-house lender vs. shopping elsewhere.
If you already own a home and have student loan debt, there are mortgage programs for that too.
I expect similar programs to surface as more and more young people struggle with student loan debt and the dream of homeownership.