Getting a Mortgage Agreement in Principle: Everything You Need to Know
If you are planning on buying a house, the first step is to get a mortgage agreement in principle. Also known as a mortgage decision in principle or mortgage pre-approval, this is a statement from a lender that confirms how much they are willing to lend you based on your income and credit history.
Why Do You Need a Mortgage Agreement in Principle?
Getting a mortgage agreement in principle is a crucial step in the house buying process as it shows estate agents and sellers that you are a serious buyer with a mortgage lender already on board. This can give you an advantage over other interested buyers who may not have an agreement in principle.
Additionally, a mortgage agreement in principle can give you an idea of how much you can afford to borrow and what type of property you can realistically buy. This can help you narrow down your search and avoid wasting time looking at properties that are outside of your price range.
How to Get a Mortgage Agreement in Principle
1. Check Your Credit Score
Before applying for a mortgage agreement in principle, it is important to check your credit score. This is a key factor that lenders consider when deciding whether to lend you money. If you have a poor credit score, you may struggle to get a mortgage or end up with higher interest rates.
You can check your credit score for free using online tools such as Credit Karma, Experian, or TransUnion.
2. Speak to a Mortgage Broker or Lender
You can apply for a mortgage agreement in principle directly from a lender or via a mortgage broker. A mortgage broker can provide you with impartial advice on the best mortgage deals available for your circumstances and can help you navigate the application process.
3. Provide Personal and Financial Information
When applying for a mortgage agreement in principle, you will need to provide personal and financial information such as your income, employment status, credit score, and any outstanding debts. You may also need to provide supporting documentation such as payslips and bank statements.
The lender will use this information to assess whether you can afford the mortgage you are applying for and how much they are willing to lend you.
4. Receive a Decision
Once you have provided all the necessary information, the lender will make a decision on whether to offer you a mortgage agreement in principle. This decision will be based on your credit score, income, and financial history.
If approved, the lender will provide you with a document that confirms how much they are willing to lend you. This document is valid for a set period of time (usually between 60 and 90 days) and can be used to prove to estate agents and sellers that you have already secured a mortgage lender.
Conclusion
Getting a mortgage agreement in principle is a crucial step in the house buying process. It shows estate agents and sellers that you are a serious buyer with a mortgage lender on board and gives you an idea of how much you can afford to borrow.
To get a mortgage agreement in principle, you will need to check your credit score, speak to a mortgage broker or lender, provide personal and financial information, and wait for a decision. Once approved, you will receive a document that confirms how much the lender is willing to lend you.