Many in the housing industry have scratched their heads when it comes to figuring out whether millennials are interested in homeownership and, if so, how to get them into the market more than they are currently. One of the biggest roadblocks has been the generation’s ability to provide a down payment, but one homebuilder may have found the solution—or at least a solution.
According to an article by CNBC , Lennar Homes plans to help millennials pay off their heavy student debt to get them into a home, but it’s not charity. When the individual purchases a Lennar home, the can receive a payment up to $13 thousand or 3 percent of the amount of the home from Lennar’s subsidiary Eagle Home Mortgage.
The Federal Reserve Bank of New York reported that student debt is at an all-time high of $1.34 trillion. Eagle Home Mortgage President Jimmy Timmons said in a statement that particularly with millennial buyers, even though they want to be homeowners, they don’t feel like they can move forward.
"Our program is designed to relieve some of that burden and remove that barrier to owning a home,” Timmons said.
However, with the details of the plan not yet released, Seeking Alpha had a few speculations  on how a program such as this could be successful. Simply put, Lennar’s goal is to sell homes, and if millennials don’t qualify because of not meeting the “income-to-debt service ratio,” that becomes a problem. If Lennar pays off the debt, but then adds it into the mortgage, then the problem is dissolved.
“Simple example: Imagine a millennial with $13,000 in student loan debt at 5 percent with 10 years to maturity,” the report said.
Despite the interesting theory, Lennar said its assistance to a buyer’s student loan debt wouldn’t affect the home’s purchase price or add to the mortgage loan’s balance.
“No matter what, you have to make sure you understand the transaction you'd be entering," said Theodore "Ted" Daniels, Founder and President of the Society for Financial Education and Professional Development, a nonprofit that teaches financial literacy, to CNBC.