BurkeyLoan, the Miami-based mortgage lender, announced a new mortgage product that enables a borrower to purchase a home and at the same time pay off their student loans.
The mortgage product comes with a loan-to-value ratio of 120% which means consumers can borrower 20% more than the value of the house being purchased. That extra 20% can be used to pay down some or all of a consumer’s student loans.
John Burkey, chairman and Chief Executive of BurkeyLoan, said that the driving force behind this new mortgage product is the fact that millennials are putting off purchasing homes in record numbers because of suffocating student loans.
“Many millennials feel they are on a financial treadmill, making every effort to pay off student loans and save for a home while interest rates and home prices escalate. Our mortgage product offers features and benefits that support the needs of the millennial generation,” said Burkey in a release announcing the new mortgage.
The fact that BurkeyLoan is offering loans that are higher than the actual value of house properties may raise some eyebrows. Addressing this concern, BurkeyLoan says its sticking to strict underwriting standards to ensure borrowers can afford their monthly mortgage payments. Some of the underwriting criteria includes borrower credit history, the character of the borrower, and how much “skin in the game” the loan applicant has meaning the size of the down payment.
According to BurkeyLoan, their out-of-the-box method to underwriting and the makeup of its mortgage portfolio enables them special allowances. They can isolate the different risks of a mortgage loan while tapping into a group of individuals that have been shying away from becoming homeowners, also known as student loan borrowers.
Once the borrower has met BurkeyLoan’s quantitative underwriting process and down payment requirements, family and friends have the option to kick in to the mortgage. BurkeyLoan says many baby boomers want to help millennials, but recently, this generation has been caught between saving for retirement and dealing with student loan debt. The mortgage lender hopes this new program provides a way for the elderly to help the new millennial generation become homeowners.
The move comes at a time when college graduates and dropouts alike are struggling with high student debt. The monthly bills are forcing them to put off other life stages such as buying a home, starting a family, launching a business, and saving for retirement. In 2016, homeownership between millennials aged 18 to 34 fell to a thirty-year low, according to old data from the White House which has since been removed from the official website.
BurkeyLoan isn’t the first mortgage lender to offer loans with LTV’s of 120%; in fact, it isn’t the first private company to offer a new solution. The new program from BurkeyLoan is part of a trend where private companies offer some form of relief to newly employed graduates with student debt. One of the most popular and common ideas is a monthly employer contribution towards student loan payments. At any rate, these changes allude to the growing seriousness of the student loan issue as it grabs the attention of the population.
Author: Dave Rathmanner
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