Prospective Borrowers Improving Their Chances of Getting Qualified

Prospective Borrowers Improving Their Chances of Getting Qualified

08/23/2013 BY: ESTHER CHO

Tight lending standards may be keeping some prospective borrowers out of the market, but according to LendingTree, consumers overall are increasing their likelihood of getting approved for a home loan with higher credit scores and lower loan-to-value (LTV) ratios.

Over the last year, average credit scores for prospective borrowers rose by more than 10 points, LendingTree revealed in a Q2 borrower health report. At the same time, average LTVs improved, falling 1.6 percent. From the first to second quarter, the North Carolina-based online lender also found credit scores increased in 41 states, while average LTVs decreased in 43 states.

“It is encouraging to see a shift towards more responsible borrowing. Higher credit scores and improved LTVs are a sign that borrowers are working to improve their financial health,” said Doug Lebda, LendingTree founder and CEO. “As the housing market bounces back, credit is becoming more accessible, making it easier for consumers to qualify for mortgages. But consumers still need to monitor their credit scores and understand their financial situations when looking to purchase a home in order to qualify for the lowest rates and maintain long-term financial health.”

To determine borrower health, LendingTree used a 100 point scale that included credit score, LTV, and overall “lendability” of potential buyers.

According to the report, prospective borrowers in Washington D.C. have the strongest profile when it comes to qualifying for a home loan.

D.C. was assigned a score 96.53, far above the national average of 81.51. The average credit score for potential buyers in the area is 689, and the LTV is 85.30.

Prospective borrowers in New Jersey were found to be the second most healthy, with a measured score of 93.67. Hawaii, Massachusetts, and California rounded out the top five with scores above 90.
Mississippi ranked at the very bottom, with a score of 67.83. Other bottom-ranked states were West Virginia (70.71), Alabama (71.41), Kentucky (72.88), and Indiana (72.91)

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