In simple terms, a Mortgage Agreement in Principle (seen sometimes as AIP, DIP, Decision in Principle & Mortgage in Principle) is a document provided by a mortgage to prove to the vendor of a home, that the lender has agreed in advance (prior to credit checking, which of course can change things) that you will be able to borrow from them ahead of finalising a sale. It is important to remember, however, that it is not a guarantee of a definite mortgage, as a full application will still be requiring further background checks.
Having your mortgage agreed at the outset can be massively helpful in negotiating on an asking price with a vendor. This is because it sets you ahead of other buyers, who maybe aren’t as prepared as you are. In the eyes of the vendor, a potential buyer who is maybe only one step away from obtaining a mortgage is a lot more appealing than someone who hasn’t even approached a lender or broker yet.
When you are ready to make an offer on a new home most Estate Agents will undertake due diligence and ask for proof that you have funds available to complete the purchase. The evidence required will typically be in the form of bank statements and also an Agreement in Principle certificate, something that we can help you obtain within 24 hours of your initial free mortgage consultation. Once you have provided the Estate Agent with all this documentation, normally this is where they would stop marketing the property and put a “Sold” or “Sale Agreed” board up.
Another perk to the Agreement in Principle is that having it prior to making any offers might persuade a seller to accept an offer you put forward on their property underneath the asking price, even if someone who is less prepared is willing to pay exactly what the asking price is.
When it comes to buying a house, many customers, especially first time buyers in Sunderland go in full steam ahead, making an offer on a property without first checking that they can actually go forward with the sale and a mortgage. This can and often does lead to possible disappointment if the mortgage application happens to fail.
Once they’ve reached that point in time, they have really got their heart set on their new family home. Any form of disappointment can usually be avoided if you get in touch for Mortgage Advice in Sunderland early on in the process. Sometimes there are underlying issues that can cause a mortgage to decline. Given some time and with the help of an advisor, these can possibly be overcome.
An example of this is that there may be a recurrent issue on your credit report, perhaps a mobile phone bill that has been disputed. This is something that can be easily rectified. Other issues might include finding out you weren’t on the voters roll when you thought you were. Once again that can be sorted out within a few weeks.
In some cases, you may not be able to get a mortgage at all. If that’s the case it’s better than you know ahead of time, as opposed to getting the process so far underway, only to find out you can’t and everything comes to a screeching halt. Our mortgage advice team will be able to tell you what steps you need to take in order to improve your credit-worthiness for the future.
If you’ve never been turned down for credit it’s highly likely that you do have a good credit score. You’re even registered on the Voter’s role and you’ve always paid your credit commitments on time. Sounds pretty flawless, except it may still not go to plan.
It’s important to note that realistically, you could approach 10 different lenders these days and get 10 different maximum mortgage amounts! They all calculate affordability in their own unique ways and it depends on individual criteria. If you’re self employed in Sunderland you may also find that it really is a minefield. Some lenders take your net profit, whereas others will opt to use your salary and divided. Some even use your latest year, whilst others use an average over 3 years.
Being aware of your borrowing limits is important, as then you know for sure what your price range will be. One of our mortgage advisors in Sunderland will be able to advise you of the maximum mortgage available to you. Also, more importantly, together we’ll work out how much you will roughly be able to borrow each month.