Buying a home for the first time, or even moving home, is one of life’s biggest personal and financial milestones with countless steps to undertake until you’re handed the keys. One of those steps is obtaining a mortgage in principle. This is an important financial step to determine the type and cost of houses you can search for.
Let’s delve into what the mortgage in principle is for and why you need one when buying a home.
Understanding a Mortgage in Principle
A mortgage in principle is a statement from your lender stating the amount of money they are willing to lend you to purchase a home. Also known as an Agreement in Principle (AIP), it is not a guarantee of the loan amount but a guide. The information you provide on your mortgage application such as how much you earn, how much current debt you have, your credit report score, and the current market interest rates, determines the amount they are willing to lend.
Once your lender has completed all the checks they will hand you an official mortgage in principle, enabling you to view properties in the correct price range. You can also show this statement to sellers to show that you are interested in the property and serious about buying. A mortgage in principle is not a guarantee of the full amount of money able to be lent to you, it is an estimate based on current factors.
Why Do You Need a Mortgage in Principle?
A mortgage in principle is an important statement to obtain when purchasing a house as it:
- Clearly defines your budget and helps you to understand how much you can borrow, allowing you to view houses in your price range.
- Shows sellers you are a serious buyer and in a position to secure a mortgage.
- Streamlines the buying process and allows you to move quickly once you find a property you like since the lender has already performed the basic financial checks.
- Helps you avoid disappointment by viewing a property and falling in love with it before you have determined your budget and whether or not you can afford it.
When Should You Apply for a Mortgage in Principle and How Long Does It Take?
Ideally, apply for a mortgage in principle before you start house hunting, as it helps determine a budget so you know what houses you can realistically afford. It’s easy to do and can often be acquired in 1 to 3 days if there are no issues, enabling you to house hunt and giving you the upper hand against competition in making offers. You can go directly to lenders to obtain a mortgage in principle, or they can be sought through a reputable mortgage broker.
How Long Does a Mortgage in Principle Last?
A mortgage in principle usually lasts for around 30 to 90 days, depending on the lender. If you don’t find a property within that timeframe, it’s sometimes possible to renew the term or you may need to reapply.
Does a Mortgage in Principle Affect Your Credit Score?
All mortgage lenders work differently but usually, only a soft check will be carried out on your credit report when obtaining a mortgage in principle, which doesn’t tend to be referenced on your credit file. A hard search, which is referenced, is only usually carried out when applying for a mortgage and can have an impact on your credit score.
Speak to a Trusted Mortgage Broker to Help with a Mortgage in Principle Today
TaylorMade is an
independent mortgage broker, based in
Manchester but operating all over the UK, and we pride ourselves in extensive knowledge and experience of the mortgage market. We understand how daunting it can be to obtain your mortgage in principle, ensuring that you are getting the best deal possible to secure the home of your dreams, but we are here to put your mind at ease.
We are a mortgage broker who puts our customers first and will hold your hand every step of the way from your mortgage in principle through to completion. We have access to lenders with the best rates on the market. So,
get in touch with your trusted mortgage broker today and see how we can help you.
