The financial health of prospective borrowers dropped in the first quarter, reflecting a growing pool of mortgage seekers as home prices improve and credit standards ease.
While the latest drop illustrates Americans still have some ground to make up from the financial crash, Q1's score is still 1.3 points above where it was a year ago, implying "a broader trend of improving borrower qualification levels," the company says.
"As home prices improve and lenders loosen restrictive lending guidelines, there is a wider pool of borrowers that are able to qualify for a loan," said Doug Lebda, founder and CEO of LendingTree. "Potential borrowers with a solid financial portfolio who may not have qualified for a mortgage two years ago may find it easier to qualify today."
With mortgage rates still historically low, Lebda anticipates a more active homebuying season, expanding the pool of potential borrowers further.
Key to the first-quarter decline in borrower health was an increase in the loan-to-value (LTV) ratio of potential borrowers to an average 88.75 percent compared to Q4 2013's average 88.6 percent.
Meanwhile, the average credit score of prospective borrowers remained flat at 635.
Leading the nation in borrower health scores was Washington, D.C., with a score of 98.7. The average credit score of potential borrowers in the nation's capital was 679 in Q1, while the average LTV was 86.59 percent.
Also included in the top five states were New Jersey (with a health score of 97.2), California (94.8), Hawaii (94.3), and Massachusetts (94.1). Out of that group, all states had an average credit score above the national average, and all except Massachusetts had a lower-than-average LTV.