What is a mortgage in principle?
There are a number of hoops to jump through in the process of securing a mortgage and getting an agreement in principle is one of the most important.
Here, independent mortgage broker John Charcol explains everything you need to know.
What is a mortgage in principle?
A mortgage in principle, also known as an Agreement in Principle or a Decision in Principle, is a written agreement from a mortgage lender that states how much money they’ll be happy to lend to you to buy a property.
The agreement is made on the condition that the information you provide the lender is correct. You typically give them information on your income, outgoings, address history and credit commitments – among other things.
The mortgage in principle does not guarantee that your mortgage application will be accepted, nor does it guarantee how much you’ll ultimately be able to borrow.
The lender will still need to underwrite your full mortgage application, that will include things like payslips and bank statements, as well as organise a valuation on the property you want to buy.
Where does a mortgage in principle come into the mortgage process?
You apply for a mortgage in principle at the start of your house buying journey, typically before you’ve found your dream property.
The lender performs a credit search and calculates your affordability as part of the mortgage in principle, so you’ll know roughly what you can borrow when you start looking at properties and making offers. It also shows sellers that you’re in a good position to buy.
How do I get a mortgage in principle?
To get a mortgage in principle, you’ll need to approach a mortgage broker directly or via a mortgage lender.
Although the mortgage in principle is not the full application, you still need to provide some information, as mentioned above.
Your lender or adviser will typically ask for:
– Personal details such as name, date of birth and address
– Address history from the past three years
– Information about your income
– Information about your expenditure and existing credit arrangements.
For more information, or for support securing a mortgage in principle, contact John Charcol on 0333 242 8556.
Will getting a mortgage in principle affect my credit rating?
When mortgage lenders are considering how much money to loan you, they’ll need to check your credit history to ensure you’ll be able to make your monthly payments.
A mortgage in principle is not something you enter into lightly. When your lender carries out credit checks, it’ll leave either a soft or hard footprint.
A soft footprint isn’t likely to impact your credit score with other lenders as they won’t be able to see it, but multiple hard footprints can.
Having a bad credit profile is likely to have a negative impact on your application and the deals that are available to you.
What if I don’t pass eligibility checks for a mortgage in principle?
If you’ve been refused a mortgage in principle, don’t lose hope. There are a number of reasons why you may have been refused and it doesn’t mean you won’t be able to try with another lender.
But it’s important to understand exactly why you didn’t meet the criteria and ensure you resolve any issues before you try again.
If you’re restricted by time and need to find another lender ASAP, an independent mortgage broker should be able to help you and advise you on which lenders are more likely to accept your situation and application.
How long does a mortgage in principle last?
Generally, a mortgage in principle is valid for at least 30 days. This is due to the fact consumer credit file information updates every month.
If it expires before you need it you can re-apply but be careful not to request too many, as too many hard credit searches could end up harming your credit profile.
If you need any further information regarding a mortgage in principle, or want to speak to an expert regarding any other stage of the mortgage process, please call 0333 242 8556 or submit an enquiry.
OnTheMarket receives an introducer fee from John Charcol of up to 30 per cent of the value of the fees paid by the mortgage lender to John Charcol for each successful mortgage application arranged by them.
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