Quick guide on getting a mortgage agreement in principle and the information that is required.
This article provides generic information on the Mortgage Agreement in Principle process. I strong advise that your first port of call, after reading this article, should be to contact a professional and independent mortgage broker, such as Niche Advice, who will run through the preparation for your specific case and circumstances. They will also be able to provide advice on the house buying process and the full application processes.
What is an ‘Agreement In Principle’ (AIP)?
The purpose of an agreement in principle is to provide initial and timely reassurance from the Mortgage Lender on their willingness to lend. It involves the imparting of hard facts about applicant’s personal circumstances.
The Mortgage Professional should double check the facts you are looking to provide for accuracy, which may include referencing documents such as payslips, bank statements etc.
A Mortgage Agreement in Principle is followed by a full mortgage application, and the information supplied in the initial decision will be crossed referenced. It is therefore vital that the facts supplied to the Mortgage Lender are right first time as incorrect information is frowned on by their Underwriters and may result in your case being turned down or an alteration to the terms they are willing to offer.
To confuse matters Mortgage Lenders refer to the initial mortgage decisioning process by either the phrase ‘agreement in principle (AIP)’ or ‘decision in principle’ (DIP).
Importantly, not all mortgage in principles are the same. So be warned and they may give you a misguided sense of security. Make sure you understand the extent of the validation against the Lender’s Underwriting Policy, and that it has included a credit search.
6 of the best things to know about a Mortgage Agreement in Principle
Below I have provided six helpful important points about the mortgage decision in principle process:
- Obtain your Mortgage Decision In Principle as soon as you can
You do not need to have a definite property in mind to obtain a mortgage agreement in principle. You do however need to have made some basic decisions such as:- How much you are willing to spend
– How you much deposit do you have
– Whether this will enable you to purchase a house or a flatThe decision-principle will check back your affordability to make sure you are in the right ball park and ensure you are looking in the appropriate properties within your price bracket.
- Avoid Conflicts of Interest
Don’t be kidded into taking mortgage advice from the Estate Agent. They can push certain Lenders from a set panel rather than offer full independent advice from the whole market. Also if they know your borrowing potential they may be tempted to up the vendor’s offer who they also have a relationship with.
- Be prepared before you enter the Estate Agency
If you have a decision in principle already the response will be much more warm as they will see you as a definite candidate rather than a time waster. In fact the majority of estate agents tend not to take properties of the market until they have confirmation from a Mortgage Professional that a mortgage has been agreed in principle. This sometimes extends to written confirmation or the production of a Lender’s Decision In Principle Certificate.
- Get Your Affairs In Order
Firstly, it’s advisable to obtain an online credit report from either Equifax or Experian. This will highlight if there are any issues with your credit profile and will enable sure your Mortgage Broker to make an appropriate Mortgage Lender selection. Although it seems daft to say but I regularly encounter would-be mortgage applicants who do not seem to have a handle on their finances. This will make Mortgage Lenders very nervous. You should familiarise yourself with your outgoings. Check your bank statements for your direct debits and standing orders for things like personal finance, transport costs, childcare etc, and payslips for deductions such as union subs, pension contributions etc. Do some research into your future costs such as service charges of the property you wish to buy, revised commuting costs, utility bills and council tax banding. The internet is very helpful in this respect. Basically the more information you submit to your Mortgage Professional the more accurate Mortgage Agreement in Principle should be.
- How long does a Mortgage Decision In Principle last? Can it be renewed?
Mortgage agreement in principle is normally valid for 30 days, but it should be simple enough to get one renewed. Do NOT be swayed in running one sooner than you would like. Often pressure can be applied by third parties such as estate agents and vendors but running a mortgage decision in principle invariably leaves a mark on your credit file which may affect your status.
- Aim High
When it comes to getting a mortgage application in principle is normally best to try and get the maximum amount agreed. Correcting the amount downwards is relatively straight-forward. If you know your limit it should help focus in property selection and negotiation.
Please click below on a recent article that I have wrote in regards to what documents are needed for a mortgage application. Although this is very comprehensive and has been specifically focused on the mortgage applications. It will give you a good idea around what actually required for the whole process and it certainly will not do you any harm to gather these the documentation in good time.
If you’re looking to get a Mortgage Application in Principle why not complete our enquiry form or call us on 0207993204
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Finance Brokers In London. His role is very much focused on Property financing both on residential and commercial lines.
You can call Payam on 020 7993 2044 or alternatively complete the enquiry form so he can personally get in touch with you.
Niche Advice is not tied to any bank, building society, estate agent or insurer and offers Independent Mortgage and Insurance advice.