If you’re looking to buy a property, you may have heard about a Mortgage Agreement in Principle. Find out more about the benefits of having one…
If you’re hoping to move house soon, you may have noticed there’s not much choice on the property market. There are currently more buyers than properties for sale, so you’ll need to move swiftly if you find your ideal home before someone else does.
Having your paperwork ready so that your broker can shop around for your mortgage promptly is a good idea. It’s worth getting this done before you start searching for a property so that your broker can speak to lenders on your behalf. Once they’ve done that, you could ask them to provide you with an Agreement in Principle (AiP), which could place you in a stronger position as a buyer.
An AiP is a certificate from a lender which confirms that you have passed their credit scoring process and that they might be prepared to lend the amount requested to you. It’s also known as a Mortgage Promise or Decision In Principle. While it doesn’t guarantee you a mortgage (you still need to apply for one formally), it will give you and the vendor of the property you might be looking to buy, the confidence that your finances are in place.
To obtain an Agreement in Principle, your broker will need to discuss your circumstances, such as your employment details, income, details of your regular outgoings and any loans, along with your preferences for the mortgage.
Full mortgage application
Once you’ve received an Agreement in Principle, the next stage of the process is to make the full mortgage application. Here the lender will request additional information, including the details of the property to be mortgaged, along with any supporting documents they deem necessary.
It could take two to four weeks for you to get a formal mortgage offer if you decide to go ahead. However, the benefit of having an Agreement in Principle is knowing that you’re in a position to proceed with a mortgage application, which means you can view properties within your price range.
You may wonder whether an AIP is a reliable indicator of your ability to get a mortgage. It’s important to be aware that it’s not a legally binding document, and you could still be refused a mortgage. However, this is usually because the lender has discovered something that doesn’t meet their criteria when you apply for a mortgage.
The validity period of an Agreement in Principle varies from lender to lender, but is typically one to three months. After that time, you’d need to apply for one again.
Are you a first-time buyer hoping to get onto the property ladder soon? For more advice, download our free guide for first-time buyers.