Mortgage ‘borrower health’ on the mend


One of the primary reasons the housing recovery is hot to trot in some states is that those states have home buyers with the financial prowess buyers don’t have in still struggling markets.

Offering competitive loan comparisons online, LendingTree recently released the results of a report that analyzed the financial health of prospective borrowers, ranking each state and the District of Columbia, according a “borrower health score.”

Borrower health is based on a 100-point scale. It was calculated by using a weighted average of credit score, loan-to-value ratio (LTV) and overall ability to borrow.

Mortgage seekers in each state, during the second quarter of 2013 were put to the test.

LendingTree’s “Borrower Health Report” reveals, since last year, prospective borrowers have increased average credit scores by more than 10 points.

They also have reduced average LTV ratios by 1.6 percent.

Both higher scores and lower ratios improve the likelihood a borrower can qualify for a home loan.

Between the first and second quarters of 2013, average credit scores for prospective borrowers increased in 41 states and average loan-to value ratios for prospective borrowers declined in 43 states.

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States with little borrower health

“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.

Here’s a quick look at states with the highest borrower health scores and some background on each market.

• Washington, D.C., borrower health score, 96.53 – Good paying government jobs are key in this housing recovery. The 7 percent unemployment rate in June, rose to 7.1 percent in July, but that’s still below the national rate of 7.4.

• New Jersey, 93.67 – New Jersey? Really? Really. Real estate is very local and diverse in the Garden State and a glut of foreclosed properties makes for greater affordability, according to the National Association of Realtors. Overall, prices have been falling this year, but prices are up in large swaths of the state.

• Hawaii, 92.09 – The unemployment rate in the Aloha State was 4.5 percent in July. Another key for the boom here is subprime loans were kept at bay during the boom. That means borrowers really know how to get a home loan.

• Massachusetts, 91.76 – Employment is flat and unemployment at 7.2 percent, but home prices took off like a rocket in late 2012. Late last year, wealthy buyers (not investors) began making a run on the market and accounted for 40 percent of purchases, according to the Massachusetts Association of Realtors.

California, 90.77 – Wall Street Journal’s MarketWatch’s recently announced “America’s Hottest 10 Housing Markets” Golden State cities dominated: Oakland (No. 1), Orange County (No. 2), Santa Barbara (No.3), San Jose (No.4), Los Angeles, (No. 6) and San Diego (No. 9). It ain’t cheap living in California’s major metro areas so you better have borrower health that can withstand the drama and get a home loan.

Worst bottom scores in the South, Midwest

“Consumers still need to monitor their credit scores and understand their financial situations, when looking to purchase a home and in order to qualify for the lowest mortgage rates and maintain long-term financial health, said Ledba.

It’s not certain when the South will rise again.

In LendingTree’s study, the worst borrower health scores in the low 70s were found in Mississippi, West Virginia, Alabama, Kentucky and Indiana.

The average score for the all fifty states and Washington, D.C. was 81.5.

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