A Mortgage Agreement in Principle (AIP) is essentially a document which provides an insight to the written estimate you have received from a mortgage Lender. It proves you have a mortgage in place.
To the Estate Agent, it proves you are creditworthy as you have in theory, passed the lenders credit score. However, it is not a guarantee that you will definitely get a mortgage as a full application will require further background checks.
A Mortgage Agreement in Principle is not a guarantee that you will definitely 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. This 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 normally 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 actually proceed. This can lead to terrible disappointment if the mortgage application fails. By that time they have really got their heart set on their new family home. This disappointment can be avoided by contacting us at an early stage. Sometimes there are things that are causing a mortgage to decline that can be overcome given a little time.
For example, there may be a niggling issue on your credit report, perhaps a disputed mobile phone bill which can be easily rectified. Maybe you thought you were on the Voter’s roll and you’re not – once again that can be 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.
So you know you’ve got a good credit rating because you’ve never been turned down for credit, you’re registered on the Voter’s role and you’ve always made your credit card payments on time and this all good for getting your Mortgage application on its way but there are other potential problems you are yet to have to overcome.
For example, you could approach 10 different Lenders these days and get 10 different maximum mortgage amounts as they all calculate affordability in their own unique ways. If you’re self-employed it can be even harder for you as an applicant: some Lenders take your net profit, others your salary and divided whilst some others use your latest year, others an average over 3 years.
Knowing your borrowing limits is important 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 and together we’ll work out how much you can afford to pay back each month.
Our Mortgage Advisors in Derby are available for same-day appointments which is handy if you’re after a Mortgage Agreement in Principle and then you can proceed to make an offer on the property you have spotted. You will then be better placed than other people viewing the property as you have taken the next step already and the Estate Agent can put your offer down as a ‘qualified purchaser’. From this, you’re in a good position to proceed.