Agreement in Principle
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Agreement in Principle
James Best talks to us about an Agreement in Principle.What is an Agreement in Principle?
An Agreement in Principle is a cursory mortgage check by the lender, which could involve either a soft or a hard credit search. It demonstrates to a buyer how much they could borrow.
An Agreement in Principle, a Mortgage Promise and a Decision in Principle are all exactly the same thing.
What should I do if my estate’s agent is asking to see my Agreement in Principle? How do I get one?
Estate agents often ask for an Agreement in Principle to ensure that if you are reliant on a mortgage to purchase a property, you’re in a position to proceed.
Often estate agents will request sight of this document before you could make an offer on a property. I would recommend speaking to a qualified mortgage broker.
You could then look at a variety of different mortgage options and get your Agreement with the most suitable lender. However, you could get a Mortgage in Principle with your own bank or even online.
Once you’ve got an Agreement in Principle you don’t have to see that mortgage through or stick with that option. You still have the opportunity to choose something else if there’s something better out there for you.
Do I have to have an Agreement in Principle through the estate agent I am looking to purchase through?
No – and this is a bugbear for many mortgage advisors. We do get clients who come to us that have been told this by certain companies. But I will stress this – you are absolutely free to choose whoever you wish to do the Mortgage in Principle, and the mortgage itself.
Many of my clients prefer not to go through the estate agent, because it feels too personal and could be a conflict of interest.
Unfortunately, some companies like to give the impression that to proceed with a property they are selling, you have to use their in-house services. Ultimately it’s completely your choice.
Speak To an Expert
Come on in and be quite forward with what you’re after – just be very honest with your mortgage broker. It’s good to make sure that we know absolutely everything about you. That way we can’t be blindsided by a lender. An open book policy is very good when coming to see your mortgage broker.
How reliable is an Agreement in Principle? How long does an Agreement in Principle last?
It varies from lender to lender, but typically they are valid from 30 to 90 days. Once it has expired, you could refresh it or get another.
Do speak to a suitably qualified mortgage professional when you’re doing that because some Mortgages in Principle involve a hard credit search – and doing multiple searches could impact your ability to borrow in the future.
In terms of reliability, the Mortgage in Principle is only as good as the information contained within it. So if the mortgage company interprets your information differently when your application is fully submitted, you could encounter problems.
It’s a good reason to consult an expert who has an awareness of how the mortgage companies will interpret your personal and financial circumstances. You then won’t have any problems going from the Mortgage in Principle up to the full mortgage application.
Can I make an offer with an Agreement in Principle?
Yes, you could – and you can actually make an offer without one. With a Mortgage in Principle, your offer is likely to be viewed more favourably as it demonstrates that you have at least had a conversation with a broker or a lender, and there is a bank that will consider giving you a mortgage for the purchase you’re looking to make.
Does an Agreement in Principle mean you’ll get a mortgage?
It is a step in the right direction and means you’ve passed those initial credit checks – but it doesn’t guarantee you will get a mortgage.
It’s only as good as the information contained on it, which is why you need to speak to a qualified professional to make sure your information is relayed to the lender accurately. Then they’ve got everything in place to proceed smoothly for a mortgage when you’re ready.
Will I need a credit check? Does an Agreement in Principle affect credit score?
Yes, and that’s why speaking to a broker is paramount – because some mortgage companies don’t do any credit checks at all to give you a Mortgage in Principle. Some do soft credit checks and some do hard credit checks.
A soft check will show up on your personal credit file but will not have an impact on your ability to be able to proceed. Hard credit searches leave a footprint on your credit file, and doing too many of those within a short period could affect your ability to borrow in the future.
When you deal with a mortgage broker, they will go through with you what a credit search means and how it affects your credit file. If we have sight of the credit reports, we’re in a good position to advise you on the most suitable way forward.
How do I apply for an Agreement in Principle and how long does this take?
You could do it online yourself or through your own bank or building society, or you could speak to a mortgage professional like myself to take care of it all for you.
If we’ve got all the documentation and information to hand, it shouldn’t take very long to get a Mortgage in Principle. Doing it yourself online without having it checked could potentially make your full application take longer or be incorrect. That’s why it’s worth speaking to a broker – to make sure that it’s done as smoothly and as quickly as possible.
You’ve demonstrated how a mortgage broker can help – is there anything else we need to know?
We help clients every day on their mortgage journey, from start to finish. That includes not just the mortgage, but helping with questions around viewing properties, surveys, solicitors and more.
We’re there to support you at every step. We are by your side to help you through that whole process, and hopefully take away as much stress, hassle and anxiety as possible. A property purchase or remortgage is a major financial transaction, and we make sure you’ve got the most suitable terms and you’re not paying too much, essentially.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.