A Mortgage Agreement in Principle (AIP) is essentially a document to prove you have a mortgage in place. To the Estate Agent, it shows you are creditworthy as you have passed the lender’s credit score.
However, it is not a guarantee that you will get a mortgage as a full application will require further background checks.
How having your mortgage agreed at the outset can help you negotiate on an asking price. A Mortgage Agreement in Principle is essentially a document to prove you have a mortgage in place. It is something we obtain for all of our clients, and almost all Lenders offer them.
A Mortgage Agreement in Principle is not a guarantee that you will get a mortgage as your full application will require further background checks (such as evidence of income) and a satisfactory valuation of the property itself.
However, it is a good idea to get one done at the earliest opportunity for the following reasons:
When you are ready to make an offer on a new home, most Estate Agents will undertake due diligence and ask you to produce evidence that you have funds available to complete the purchase.
It will take the form of bank statements and also an Agreement in Principle certificate that we can provide for you. Once you have provided them with all this documentation, the Estate Agent will then frequently stop marketing the property and put a “Sold” or “Sale Agreed” board up.
If you already have a Mortgage agreed before you make an offer you are making yourself appear as an attractive proposition as this proves you are not making an offer on a “whim”, you’ve thought about how you’re going to fund the purchase and do something about it.
This might persuade a seller to accept an offer you put forward on their property underneath the asking price.
When it comes to buying a house, some clients have always “put the cart before the horse.” They go full steam ahead and make an offer on a property without first checking that they can proceed. It can lead to terrible disappointment if the mortgage application fails.
By that time, they have got their heart set on their new family home. This disappointment can be avoided by contacting us at an early stage.
Sometimes some things are causing a mortgage to decline that can get overcome given a little time.
For example, there may be a niggling issue on your credit report, perhaps a disputed mobile phone bill that can get easily rectified.
Maybe you thought you were on the Voter’s roll, and you’re not – once again, that can get sorted out given a few weeks.
Or maybe you can’t get a mortgage at all! But if that’s the case, it’s better than you know now rather than mess people about and we’ll be able to tell you what you need to do to improve your credit-worthiness for the future.
Ok, so you know you’ve got a good credit rating because you’ve never get turned down for credit, register on the Voter’s roll and you’ve always made your credit card payments on time.
You could approach ten different Lenders these days and get ten different maximum mortgage amounts!
They all calculate affordability in their unique ways. If you’re Self-Employed in Leicester, it is a minefield: some Lenders take your net profit, others your salary and divided. Some use your latest year, others an average over three years.
Knowing your borrowing limits is essential as then you know for sure what your price range is. We’ll be able to advise you of the maximum mortgage available to you.
Also, more importantly, together, we’ll work out how much you can afford to pay back each month.