Buying a new home? A mortgage in principle can give you an estimate of what your budget should be and reassure sellers that you can afford to buy a property. Read on to find out more on why you need it and how to get one.
In this article:
- What is a mortgage in principle?
- How to get a mortgage in principle?
- How long does a mortgage in principle last for?
- Does it affect my credit score?
- What’s the difference between a mortgage in principle and a mortgage offer?
What is a mortgage in principle?
A mortgage in principle, or agreement in principle is an initial indication of whether you will be approved for a mortgage of a requested amount. Getting one will help you understand your buying power, focus your search on properties within your price range and show sellers and estate agents you’re a responsible buyer who’s serious and ready to buy. Find out more about the cost of buying a house.
How to get a mortgage in principle?
Getting an agreement in principle is simple. You can start your application as soon as you’ve decided you’re ready for your home-hunting, as it might save you time in getting your offer accepted, as you will need to gather up documents in preparation. You can typically complete the process online through your lender’s site and will get your results within a day.
To get a mortgage in principle you’ll need to provide your personal details, including:
- Your name
- Date of birth
- Three years of address history
- Income information – such as payslips, bank statements and pensions or investments
- Outgoings – including travel costs, childcare and school fees
How long does a mortgage in principle last for?
Your mortgage in principle length ranges from 30 to 90 days, depending on the lender. If you haven’t found a property or your offer hasn’t been accepted, you might be able to renew its terms after that period.
Do I need a mortgage agreement in principle to view a house?
The short answer is no. However, you may have less chance of an offer being accepted, as many sellers look for buyers who won’t slow down the process. They often want to close a deal as soon as possible, and if you’re not ready, it’s likely that someone else will be.
Does it affect my credit score?
After you’ve applied for a mortgage in principle, your lender will make a ‘soft’ or ‘hard’ credit check to assess your eligibility, reviewing your credit history and debts, like loans and credit cards. Soft searches don’t harm your credit score and aren’t visible to potential lenders that may review your credit reports – whereas hard searches will show that you’ve applied for credit. Having many hard searches could negatively affect your credit score, as it suggests to mortgage providers that you’re having difficulties getting accepted by other lenders.
To avoid any surprises, it’s worth checking with your lender what level of credit survey they’ll run.
What’s the difference between a mortgage in principle and a mortgage offer?
You’ll get a mortgage in principle at the beginning of the house-hunting process when you’re still looking for a house. It’s a written statement that proves you can afford to buy a house but doesn’t guarantee that you’ll get a binding mortgage offer.
Once you’ve made an offer on a house and it has been accepted, you can then move to the next step and officially apply for a mortgage by completing a full application. During this process the lender will thoroughly review your income and personal information in a detailed assessment of your financial situation. If your application is successful, you’ll then receive a binding mortgage offer within two to six weeks.
How long does it take from mortgage in principle to mortgage offer?
You can use your agreement in principle to apply for a mortgage and it can take between two to six weeks to get an offer – as lenders will need to run credit checks to see if you meet the eligibility criteria.
Disclaimer: The article above is only a rough guide to give you an idea on what a mortgage in principle is and how it works.