An Agreement in Principle is what you need
An Agreement in Principle (sometimes called a Decision in Principle) is used instead of a mortgage offer. This is a statement from your mortgage lender declaring that they'd be willing to offer you a set amount of money based on the financial information you've provided.
This isn't a guarantee that you'll get a mortgage, there are still a number of checks to make, but gives a clear indication to a seller that you're a serious buyer. It's also a necessary step before your solicitor will send a formal offer on your behalf.
What information do I need to give to get an Agreement in Principle?
When you apply for an Agreement in Principle you need to give accurate information about yourself and your financial situation. Here's a list of the information you'll generally have to get to get one put in place.
- Personal information such as your name and date of birth.
- Address history for the last three years at least.
- Information around your income for yourself and your partners (if applicable).
- A rough rundown of your outgoings.
- Details about any existing credit agreements you have.
What should I know about an Agreement in Principle?
There are a couple of important things to know about your Agreement in Principle to help you on your way.
It's best to have a deposit in place. While it's not essential to have a deposit ready to get an Agreement in Principle, having one will give a more accurate picture of where you are financially.
Your Agreement in Principle will expire. Most last between one to three months, so it's best to get one only when you're ready to start looking at properties.
A mortgage adviser can arrange your Agreement in Principle for you, with a lender who is most likely to approve you. You need a Solicitor to submit your offer on the property for you, but they generally cannot arrange a mortgage for you. It's a good idea to talk to a mortgage adviser before you start looking at properties. A good local adviser can help to advise you on the amount you are likely to be able to borrow and give you tips on the local market and areas to buy.
What is a mortgage offer?
A mortgage offer is a formal notification from a lender detailing how much money they are willing to lend a person in order to buy a home. A mortgage offer is unlikely to be withdrawn as the lender will have completed a full background check on the buyer against the valuation of the property, so all they have to do is accept the offer.
Mortgage offers generally last three to six months before they expire. When they do, generally you'll need to either extend it or re-apply for one.
Do I need a mortgage offer to put an offer on a house?
Mortgage offers are property specific, so it's unusual to have a mortgage offer before having your offer accepted on the property. Instead, you will usually need an Agreement in Principle to put an offer on a house.
Soon after having your offer accepted by the seller of the property you're buying, you'll need to contact your mortgage adviser to get your mortgage offer underway. Your solicitor needs to have a mortgage offer in place before they can conclude missives and agree on the terms of the sale, which is when you property purchase becomes legally binding.
It is a good idea to get an Agreement in Principle from a trusted mortgage broker when you start your property search.