Do you need a mortgage Agreement in Principle?

| 2 min read

If you are buying a home and want to get a mortgage to cover your new home's cost, you should be aware of what is a mortgage Agreement in Principle.

What is a mortgage Agreement in Principle?

A mortgage Agreement in Principle (also called decision in principle or mortgage in principle) is a document provided by mortgage lenders after giving them your basic information about your finances and a credit check.

It will give a figure the mortgage lender would 'in principle' lend you. However, you should be aware that this does not guarantee that you will get a mortgage offer.

Why should you get a mortgage Agreement in Principle?

  • Speed up the process - If you have a mortgage Agreement in Principle, it will help in speeding up the home buying process because you will have a rough idea of how much you are likely to be able to borrow.
  • Appealing buyer - It will make you a more attractive buyer and give confidence to the estate agent and the seller that you are a serious buyer.
  • Eligibility criteria - Further, if you apply for a mortgage Agreement in Principle, you will know whether you meet the mortgage lender's eligibility criteria. If your application for mortgage Agreement in Principle is rejected, it will give will you a chance to address those concerns before you start hunting for houses.

Is it compulsory to get a mortgage Agreement in Principle?

It is by no means necessary for you to get a mortgage Agreement in Principle before you start looking for your new home or when making an offer.

However, if you are in Scotland and buying a home there, a mortgage Agreement in Principle is often required to demonstrate that you are a serious buyer.

How to get a mortgage Agreement in Principle?

It quite simple to get a mortgage Agreement in Principle and you should get it within a few hours. After you have narrowed down the mortgage you want to get, you need to request the mortgage lender to provide you with a mortgage Agreement in Principle.

You will have to provide the lender information regarding your income and outgoings. Further, the lender will run some credit checks to decide whether you fulfil their eligibility criteria.

What should you do if you don't pass the eligibility criteria?

Suppose your mortgage lender informs you that he cannot give you a mortgage Agreement in Principle because you do not meet the eligibility criteria. In that case, it will not stop you from getting a mortgage with another lender.

However, you must understand why you did not meet the eligibility criteria. It would help if you tried to resolve the issues before trying again.

If you do not have the time, you can find another mortgage lender and request them for a mortgage Agreement in Principle. Further, you could also get help from a mortgage broker.

How will getting a mortgage Agreement in Principle affect your credit score?

Usually mortgage lender run what is known as 'hard search' to check your credit score. A hard check search will be recorded on your credit score. Multiple searches over a brief period may be presumed to be a sign of desperation; that you need credit. This makes you less attractive as a buyer.

Other lenders run what is known as the 'soft search'. This does not leave a trace on your credit report. However, it may be hard to find such a lender who does a soft search. Further, getting a mortgage Agreement in Principle for the mortgage you want is a much better idea than a random mortgage lender.

How can you get your mortgage confirmed?

When the seller has accepted your offer, you should move to arrange your mortgage. The first place to start is to see our article on making a successful mortgage application.

Please note that the information provided on this page:

  • Does not provide a complete or authoritative statement of the law;
  • Does not constitute legal advice by Net Lawman;
  • Does not create a contractual relationship;
  • Does not form part of any other advice, whether paid or free.
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