A Mortgage Agreement In Principle is also known as a decision in principle or a mortgage promise. It is essentially a document or certificate that says to your estate agent/vendor that ‘in principle’ the bank will lend you a certain amount.
It is something we obtain for all of our customers and almost all mortgage lenders offer them. In almost all cases, it proves that you are credit-worthy because for the Agreement certificate to be issued you must pass the Lender’s credit score.
If you are looking to purchase a new home perhaps as a first time buyer in Birmingham, then an Estate Agent will often want to ensure that when you are making your offer that you are ‘mortgage ready’. Your certificate will show them that you are able to obtain a mortgage and for the required amount, on top of your deposit, in order to complete the sale.
A Mortgage Agreement in Principle is not a guarantee that you will definitely get a mortgage as your full application will require further background checks (such as evidence of income) and a satisfactory valuation of the property itself.
We believe it’s a good idea to get one done at the earliest opportunity for the following reasons:
1. Negotiating Power.
2. Avoid Disappointment.
3. Knowing Your Limits.
When you are ready to make an offer on a new home most estate agents will undertake due diligence. Usually, they will ask you to produce evidence that you have funds available to complete the purchase before they mark the property as sold.
If you already have a mortgage agreed before you make an offer you are making yourself appear as an attractive proposition. Also, this proves you are not making an offer on a “whim”, you’ve thought about how you’re going to fund the purchase and do something about it.
This might persuade a seller to accept an offer you put forward on their property underneath the asking price.
When it comes to buying a house, often customers can go full steam ahead and make an offer on a property without first checking that they are actually in a financial position to proceed.
The above could lead to terrible disappointment if the mortgage application fails because by that time they have really got their heart set on their new family home.
This disappointment can be avoided by contacting us for Mortgage Advice in Birmingham at an early stage. Often, there are things that are causing a mortgage to decline that can be overcome given a little time.
Ok, so you know you’ve got a good credit rating because you’ve never been turned down for credit, you’re registered on the Voter’s roll and you’ve always made your credit card payments on time.
You could approach 10 different lenders these days and get ten different maximum mortgage amounts! They all calculate affordability in their own unique ways. If you’re self employed in Birmingham it really is a minefield: some Lenders take your net profit, others your salary and dividends. Some use your latest year, others an average over three years.
Knowing your borrowing limits is important as then you know for sure what your price range is. We’ll be able to advise you of the maximum mortgage available to you and, even more importantly, together we’ll work out how much you can afford to pay back each month.