Also known as a decision in principle or a mortgage promise, a Mortgage Agreement in Principle is essentially a document or certificate of confirmation that proves to your estate agent/vendor that ‘in principle’ the bank will lend you a specific amount.
This documentation is something we always obtain for of our customers (if they don’t already have one) and almost all mortgage lenders have them on offer. In order to obtain one of these, you must pass the Lenders credit score. This is handy because in almost all cases, this is an indication the lender that you are in fact creditworthy.
If you are in the market for purchasing a new home perhaps as a first time buyer in Birmingham, then an Estate Agent will often want to double and triple check that you are ‘mortgage ready’ when it comes to making offers. Your certificate will prove to 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 will not guarantee that you are able to obtain a mortgage, as the rest of your full application will require further background checks (such as evidence of income) and a satisfactory valuation of the property in question.
As an experienced mortgage broker in Birmingham, we highly recommend that you get one done at the earliest opportunity for the following reasons:
1. Negotiating Power.
2. Avoid Disappointment.
3. Knowing Your Limits.
Once you are ready to make an offer on a new home, the majority of estate agents will undertake the necessary steps to ensure you can proceed. Usually, they will ask you to produce evidence that you are able to afford the purchase price in order to complete the purchase before they mark the property as sold.
If you already have a mortgage agreed before you make an offer on the property, this is very appealing to the seller. This will also prove that you’ve thought about your mortgage journey and not just decided to purchase on a whim.
This might persuade a seller to accept any offers you make that are lower than what you’re looking for.
When it comes to purchasing a property, often customers can charge ahead and make an offer on a property without first checking that they can actually afford the property in the first place.
This could lead to unfortunate disappointment if the mortgage application fails because by that point they have their heart set on their possible new family home.
This can all be avoided by getting in touch with a Mortgage Advisor in Birmingham early on. Often, there are things that are causing a mortgage to decline that can be overcome with a little time and assistance.
If you know you have a good credit rating because you’ve never been turned down for credit and are registered on the Voters roll etc, it’s still worth your time coming to us for mortgage advice. You might approach various different lenders and each time get a different max mortgage amount.
These lenders all calculate affordability in their own unique ways. If you’re self employed in Birmingham it can be a rather complex though not impossible process. 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 key when it comes to applying for a mortgage, as then you know for sure what a realistic price range is. Our team of mortgage advisors will be able to advise you of the maximum mortgage available to you and help work out how much you can afford to pay back each month.