Based on what you say they'll then come up with a figure they are prepared to loan you. This document is known as the Agreement in Principle. There are three reasons why you might not want to go any further than this: Cost - if they were to verify everything you had told them its going to take time and money.
Credit Ratings - every time a lender goes to a credit agency to ask about you your credit rating takes a bit of a hit. If 9 lenders ran credit checks on you that would be 9 hits. By the time the 9th credit check is being carried out your rating might start to look a bit shakey. You don't know you can - there is a step beyond Agreement in Principle, I'll come to it in a moment. The whole - check my credit rating equals hurts my credit rating - is an odd one.
The theory behind it is that if you are applying for lots of loans you must be in financial trouble That's fine in everyday life but you really wouldn't take on two mortgages so the system is a bit defunct for property buying You can, on the other hand, get as many Agreement in Principle's as you like and your credit rating will go untouched.
Agreements in Principle are a way of helping you decide which lender to go with. Seriously do this before you start viewing or your going to end up doing it in a panic when you've found the property you want to buy.
It's also a great way to show estate agents you are a serious buyer who has planned ahead. You're more likely to be someone who will buy successfully so when a new property that suits you comes on the market you're the first number they call.
You can get AIPs online from most lenders or you can go through a mortgage broker who might be able to get you a better deal because they deal on large volumes of mortgages more on this in Chapter Sorting Out Your Mortgage.
Once you've found a property you like and had an offer agreed then you contact the lender you want to go with and they say "Yeah, you know that Agreement In Principle At the same time they'll want to know all about what you are buying by carrying out a survey on the property and waiting on a report from your solicitor that, legally, everything is in order.
Now, as I've said, an Agreement in Principle is a big tick in estate agent's eyes and moves you towards the front of the queue. But if you really want to be at the front of the queue and to speed up the buying process no end what you really want is a Pre Arranged Mortage PAM. This is where you look at the Agreements in Principle that you have requested, choose a lender and say "OK, here are all the financial documents you say you will need and go ahead and credit check me".
Using a broker can be a good way to get an idea of the kinds of mortgages on offer across the market, but always look to use a fee-free broker.
Once your lender has details on your income and other key information, they will undertake a credit check to establish your credit history. You could still be rejected for a mortgage when you come to complete your application, once your lender undertakes the full underwriting process. In a busy market, with buyers clambering for all the top properties, a seller who sees you are ready to proceed quickly with a mortgage agreement in principle is far more likely to accept your offer over that of a buyer who is not in a position to move.
Also, if you have had issues securing credit previously, obtaining an agreement in principle can provide you with added peace of mind that your purchase should be achievable. However, you should also be aware that some agreements in principle will leave an imprint on your credit history. Finally, bear in mind that mortgage lenders' rates do change and if you are not in a position to finalise your agreement in principle for several months, interest rates may have changed, meaning your proposed deal is no longer as attractive as it was.
While getting an agreement in principle can be a relatively straightforward process if your finances are in good order, there are things to consider:. A change in circumstances such as employment could affect your ability to borrow. Zenario CMS. Call: Open search. How long does an Agreement In Principal last? What information do I need to provide for an Agreement In Principal? What are the Advantages of having an Agreement In Principal? How to get a Mortgage Approved in Principle?
How much Deposit do I need to buy a House? Back to news. How do I see the information that an Agreement in Principle will be based on? How reliable is an Agreement in Principle? What do I do if my Agreement in Principle is rejected? Related Jargon affordability creditworthiness mortgage.
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