A mortgage in principle, also known as an agreement in principle (AIP), is a document given to you by your mortgage lender to show that you have passed their credit score to qualify for a mortgage. You may have also heard the term “decision in principle”, this is also the same thing.
Getting an agreement in principle can often help you negotiate the asking price with your seller. This is because the seller can see that you have the funds in place, have been preapproved by a mortgage lender and can continue immediately. Having an AIP and not having an AIP could be the difference between your offer getting accepted on a property and being rejected.
We find that our customers, particularly first time buyers in Leeds, are worried about their credit score having an impact on their ability to get a mortgage. Things such as credit searches may impact your credit score, and you will have to undergo one to obtain an agreement in principle.
However, you have to remember that a credit check will only have a negative impact on your credit score if something bad is found on your file. The severity depends on what the mortgage lender has found, for example, if you forgot to update your address for an old account, it won’t have too much of an impact on your credit score. On the other hand, if they find that you have large withstanding balances on your credit cards, you may see more of an impact.
As a mortgage broker in Leeds, when we arrange an agreement in principle on your behalf, we do not carry out any credit checks on you. We will, however, ask for your permission for the mortgage lender to carry one of these out on your credit file.
Credit searches come in two different forms; a soft credit search and a hard credit search.
Soft credit searches are not very in-depth and will only really look at your main information, such as employment, income, age etc. This is the type of search that price comparison sites use to verify that you are who you say that you are. More and more lenders are opting for this type of search nowadays when arranging an agreement in principle because they will likely perform a hard credit search on you further down the line.
Soft credit searches are hidden from your file, with only you being able to see that they have taken place. That means you can be unsuccessful in one instance and not worry too much about how it looks to others.
A hard credit search provides the mortgage lender with a much more in-depth look at your credit file. Any company that wants to perform a hard credit search on you must get your permission first before doing so. This is because they could have an impact on your credit score.
During a hard credit check, the mortgage lender will take a complete look at your financial circumstances. If you pass this check, you have much more chance of seeing mortgage success.
The downside to hard credit checks is that they will likely leave a credit footprint on your file. If someone looks at your file in the future, it will show that there has been a hard credit carried out. The outcome of the search will not show in your file, meaning that other financial institutions looking at this may be worried, especially if there are lots of them.
Mortgage lenders do not like seeing lots of different credit checks on your file, because it could suggest that you have been applying for lots of credit all at once. This is something that can put off a mortgage lender.
This isn’t to say that having a few will be drastically negative, you won’t need to worry a lot about this, it’s just always best to make sure you are cautious with it.
An AIP or mortgage in principle does not guarantee you a mortgage. Remember that you are being agreed in principle of being able to support your affordability. Mortgage lenders will require you to provide evidential documents such as your P60, bank statements, etc., to prove that you can afford the mortgage after you have an accepted offer.
If you are self employed in Leeds, the documents that you need to provide will be slightly different. It is always worth speaking with a mortgage advisor in Leeds to discuss your affordability for a self employed mortgage.
Yes, you can make an offer on a property in Leeds without an agreement in principle, however, we wouldn’t recommend it. The estate agent and the seller will want to make sure that the person making an offer on the property is serious about their purchase and has the ability to advance through to the sale of the property. If you do not have a mortgage in principle, you are not able to go straight to the next stage of the process, you haven’t even been agreed in principle as of yet.
As a mortgage broker in Leeds, we are able to arrange an agreement in principle for you within 24 hours of your free mortgage appointment.
Your agreement in principle will roughly last between 30 and 90 days. Once your AIP expires, it is a simple process to get it renewed.
All that you need to do is get back in touch with our mortgage advisors in Leeds, and we will arrange a new one with you straight away.
We always recommend getting an agreement in principle as early on in the process as possible. Even if you are thinking of moving house in Leeds, before you take up property viewings, make sure that you have your agreement in principle at the ready!
The earlier the better; having an AIP and not having an AIP could be the difference between your offer being accepted on a property and being declined.
Date Last Edited 18/09/2023