What happens after you get an agreement in principle?
In this brief guide, we are going to answer the question “What happens after you get an agreement in principle”.
What happens after you get an agreement in principle?
Below are the main steps that happen after you get an agreement in principle:
- Gather relevant documents
- Make a full mortgage application
- Mortgage affordability checks
- Mortgage offer
- Conveyancing checks
- Home survey/lender survey
- Final mortgage checks
- Home insurance
- Exchange of contracts
- Title registration
We will go into each of these steps in more detail below.
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 debt management plan
11 steps after you get an agreement in principle
Below are the 16 core steps that occur after you get an agreement in principle:
Gather relevant documents
Once you have gotten your mortgage in principle you will need to gather your income, tax, and identity documents to support the full mortgage application you are making.
We are, of course, assuming that at this point you have made an offer on the house you want to buy and that this offer has been accepted by the seller.
Some of the documents you may need to provide include:
- 3 months worth of bank statements
- 3 months worth of payslips
- Your P60 tax return
- Your SA302 calculation form if you are self-employed
- Your CV
- Your contract if you are a contractor
Make a full mortgage application
Once you have gotten all your supporting documents together and you are ready to submit your mortgage application to the lender you will then fill in a mortgage fact find(if you are working with a mortgage broker) or mortgage application(if you are applying directly with the mortgage lender).
Mortgage affordability checks
Once you have made a mortgage application the mortgage lender will then carry out mortgage affordability checks.
Mortgage affordability checks will include a check on your credit score, your income and expenses, and the property you are looking to get a mortgage on.
If the mortgage lender is satisfied that you meet their mortgage lending requirements then they will offer you a mortgage.
Whilst a mortgage offer is quite firm, a mortgage lender can still withdraw your mortgage offer for a variety of reasons.
Once a mortgage offer has been offered, the mortgage lender will then carry out various conveyancing checks on the property to ensure there are no legal issues that will affect their 1st charge on the asset.
You will have to pay for the conveyancing checks.
Home survey/lender survey
At the same time, the conveyancing checks are taking place, the home survey checks will also be taking place to ensure that the property is a suitable asset for the mortgage lender to lend on.
Some mortgage lenders will insist you pay for these checks and home survey checks will look at things such as the Japanese knotweed, damp, structural issues, and any other issues which may affect the value of the property.
If you are remortgaging with the same lender then a physical survey may not be needed.
Final mortgage checks
If everything checks out then the mortgage lender will let you know and you can now exchange contracts and complete on your purchase.
The mortgage lender will expect you to have sorted out a buildings home insurance before you exchange contracts with the seller.
This is because you will become legally liable for the building once the exchange of contracts has taken place.
Exchange of contracts
The conveyancers from the buy and sellers side will agree on a date to exchange contracts and the exchange of contracts will take place.
From this point, you are now legally responsible for the property.
One of the final things which happen after you get an agreement in principle is completion.
At the exchange of contracts, the completion date will have been agreed upon.
The completion date is the date you get the keys to your new house and can begin moving in.
Your conveyancer will update the land registry and any interested parties onthe change of ownership.
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 “What happens after you get an agreement in principle”.
If you have any questions or comments please let us know.