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Borrower Health Improves in Q4; D.C. Ranks Highest

After dropping slightly in the third quarter, borrower health bounced back to end 2013 on a high note, according to LendingTree.

Compared to the prior period, the nation’s average Borrower Health Score was up 2.8 percent to 82.2, rebounding from the third quarter’s 1.6 point drop.

The Borrower Health Score is calculated using the weighted average of credit score, loan-to-value ratio (LTV), and overall “lendability” of loan seekers in each state throughout the quarter.

According to LendingTree’s measures, the average credit score for all prospective borrowers in the United States in Q4 was 635, one point lower than in Q3. That slight drop in health was offset by a decline in the average borrower LTV to 88.6 percent, a decrease of a little more than a percentage point.

Meanwhile, the average loan amount rose nearly $3,750 to $168,747.

“Lenders are slightly more motivated to increase lending to homebuyers as refinancing activity drops,” said Doug Lebda, founder and CEO of LendingTree. “Borrowers still need to meet underwriting requirements, but for potential borrowers with less than perfect credit, there might be opportunities available to help them become homeowners.”

Looking at local data, the healthiest “state” in the country last quarter was actually not even a state: The District of Columbia beat all others with a health score of 97.9, based on an average credit score of 677 and an LTV of 86.2 percent.

Following the nation’s capital were Hawaii (with a health score of 92.7), New Jersey (92.6), California (92.4), and Utah (91.7).

The bottom states in terms of borrower health were concentrated in the South and Midwest, with West Virginia ranking 51 with a score of 69.6. It was followed closely by Mississippi (69.9), Alabama (71.6), Indiana (73.2), and Arkansas (73.5).

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