Higher home prices mean higher LTVs

Rising home prices are forcing homebuyers to take out mortgages with higher loan-to-value (LTV) ratios, according a report from online mortgage marketplace LendingTree.

When buyers put down less than 20 percent on a home purchase, their LTV will exceed 80 percent, triggering requirements by Fannie Mae and Freddie Mac that they obtain private mortgage insurance — an added burden for buyers.

LendingTree’s analysis found that the average LTV increased from 88.4 percent in the second quarter to 89.8 percent during the third quarter.

LTVs are a key factor in whether a borrower will qualify for a mortgage, and LendingTree said its “Borrower Health Score” fell 1.56 points in the third quarter, to 79.94.

That’s still 7.28 points above where it was at the same time last year, and the improvement “implies that mortgage-seekers are in relatively good health and that there is broader trend of improving borrower qualification levels,” the company said.

Hawaii, Washington D.C., New Jersey, California and Massachusetts had the best “Borrower Health Scores,” all above 90. Source: prnewswire.com.