How to get a mortgage in principle
Starting a mortgage application process can feel daunting. And before you get going, you’ll need to agree to a mortgage in principle. Read on and we’ll explain what one is and how you can get one.
Key takeaways
A mortgage in principle (agreement in principle or decision in principle) is a written estimate from a lender indicating how much you can borrow showing the estate agents and sellers that you are a serious buyer
This acts as a guide for your budget, but be aware that there is no guarantee on the amount that will be offered after a full application
This estimate lasts between 30 and 90 days, after this period it can be renewed, but may involve another credit check
Low income, low deposit, poor credit history, recent job change, or new self-employment may all be reasons for a mortgage being declined
What is a mortgage in principle?
A mortgage in principle, also known as an agreement principle or decision in principle, is a written estimate from a bank or building society, showing how much you can borrow.
This document can then be shown to estate agents and buyers as evidence that you are a serious buyer and that, provisionally, you can afford to buy a home.
Does a mortgage in principle tell you how much you can borrow?
A mortgage in principle acts as an indication of what you'll be able to borrow from a lender.
However, as it’s only an initial estimate based on your monthly income and outgoings, as well as a credit check, you may find that the actual amount you can borrow changes once you undertake a full mortgage application.
Essentially, a mortgage in principle acts as a guide for both you and an estate agent to see what your budget is.
Remember, there is no guarantee that the amount shown on your mortgage in principle will be offered by a lender once your application is complete.
For first-time buyers, a mortgage in principle is an essential step in showing you’re able to borrow funds and buy your first home.
How do I apply for a mortgage in principle?
Applying for a mortgage in principle is straightforward. You can take two approaches.
Apply via a mortgage broker. A broker should be able to access a wide range of the best deals available at any given moment. That means you can shop around and pick the best deal before they make the application on your behalf
Apply directly with a lender. If you already have a lender in mind, or use one of its other services, you can apply for a mortgage in principle directly. This can usually be done online. If applying through your bank and building society, you can do this via online banking
In both cases, you’ll need to give details about your incomings, outgoings and expenses, as well as any credit cards and loans.
You’ll also need to give your personal details and address history, usually for the past three years.
At this stage, you only need to tell lenders what your financial situation is, rather than providing bank statements, payslips or tax receipts.
How long will my mortgage in principle last?
A mortgage in principle can last between 30 and 90 days, depending on which lender you apply with.
It’s possible to renew a mortgage in principle if you have not made an offer on a property within that time frame.
Remember that with mortgage rates and deals changing all of the time, you may want to change your mortgage in principle after it expires.
Just be aware that this will mean lenders running a further credit check. If this is a ‘hard’ check, then other lenders will be able to see it.
If it’s a ‘soft’ check, they won’t. Be sure to ask lenders which kind of check they’ll do before applying for a mortgage in principle.
Does a mortgage in principle have to be honoured by the lender?
In short, no. Initially, a lender will assess your incomings and outgoings, as well as running a credit check and looking at personal details and your address history.
And while this may land you a mortgage in principle, a lender is under no obligation to offer you a mortgage based on its findings.
That’s because you will need to undergo a full affordability assessment when you make your full mortgage application.
Lenders may then ask for more information, especially if you’re self-employed or have a low credit score, and reserve the right to decline your application.
Why might a mortgage in principle be declined?
A mortgage in principle may be declined for a number of reasons. These include:
Low income, meaning you may not be able to afford repayments
Low deposit, signifying you may not have enough to secure a property
Poor credit history
You’ve recently changed jobs
You’ve just become self-employed
What happens after you get your mortgage in principle?
After you get a mortgage in principle, you can start looking for a new home. Showing proof of a mortgage in principle to an estate agent means they can find properties in your budget.
Once you’ve had an offer accepted, you will then need to speak to the lender and begin your full application.
For this, you will need bank statements, payslips and details of any credit cards and loans, as well as tax information if you are self-employed.
The lender will then carry out a full affordability assessment to decide if you can be offered a mortgage.
Our other guides
Take a look at our other useful guides on mortgages:
Do I Need a Mortgage Broker or a Lender? | MoneySuperMarket
Additional Borrowing on Mortgage | MoneySuperMarket
Can I sell my home to a family member? | MoneySuperMarket
Do I Need a Solicitor to Sell My House? | MoneySuperMarket
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