In this brief guide, we are going to answer the question ”Do I need an agreement in principle to view a property”.

Do I need an agreement in principle to view a property?

No, you do not need an agreement in principle to view a property but most sellers and real estate agents may not take you seriously if you do not have an agreement in principle.

Benefits of having an agreement in principle when viewing a property

Some of the benefits of having an agreement in principle when viewing a property include:

Sellers will take you seriously

If you have an agreement in principle then you are more likely to be taken seriously by sellers and real estate agents.

This means you have a higher likelihood of getting the property if you make an offer on it.

In some cases, sellers and real estate agents will not entertain offers from prospective buyers who do not have an agreement in principle.

You increase certainty

By getting an agreement in principle before viewing a property you will reduce any doubts you may have and be able to shop with some certainty that you will be able to afford the property and may be able to get a mortgage.

What’s the point of shopping for houses when you can’t even get a mortgage to complete the purchase?

 

 

What is an agreement in principle?

An agreement in principle is essentially an indication that a mortgage lender is willing to lend to you.

A mortgage lender will briefly run through your application to see if you meet their headline criteria for a mortgage and then provide you with an agreement in principle.

The agreement in principle will usually be valid for between 30 to 90 days and this gives you enough time to put an offer on a house you find.

Before a mortgage lender will give you an agreement in principle they will collect some basic information from you through a mortgage fact find and then do a soft credit check in you to ensure you are creditworthy before agreeing and providing you with an agreement in principle.

An agreement in principle is not a firm offer of a mortgage and you could still get declined after getting an agreementi in principle.

Some of the reasons you may be declined after getting an agreement in principle could be:

Your property is found to be overpriced and hence the mortgage lender needs to adjust their loan to value which makes you ineligible for the mortgage product.

You failed the mortgage lenders detailed financial suitability.

You failed a more detailed credit check as more information such as bad credit information was found on your credit file.

Bad credit could include:

A CCJ

An IVA

A debt management plan

A default

A bankruptcy

A home reposession

Does an agreement in principle affect your credit score?

No, most mortgage lenders will run an agreement in principle application through a soft credit search. This means you will be the only one who is able to see the footprints on your credit file and it shouldn’t affect your credit score.

Some mortgage lenders may run a hard credit search when analysing an agreement in principle application so you should make clear to your mortgage broker that you may prefer a mortgage lender who will soft credit check you when providing an agreement in principle decision.

Use a mortgage broker for your mortgage in principle

You may want to use an independent mortgage broker to help you get a mortgage on your new home.

Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.

This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.

A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.

After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle

This will allow you to shop for your home as more estate agents and sellers may take you seriously and it will also give you confidence that your mortgage is indeed a possibility before you make a full mortgage application. 

Once you have found a home you want to buy and are satisfied with the mortgage offer for your mortgage then the mortgage broker will then look to get you a mortgage offer.

This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month.

It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.

If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.

Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.

They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.

In this brief guide we answered the question ”Do I need an agreement in principle to view a property”.

If you have any questions or comments please let us know.

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.