Agreement-in-Principle: Everything You Need to Know

Agreement-in-principle, also known as a mortgage in principle or decision in principle, is a statement or a letter from a lender stating that they are willing to lend you a specific amount of money to buy a property. It is not a guarantee that you will get the loan, but it is a very good indication that you will.

If you are in the process of buying a property, you need to get an agreement-in-principle before you start house hunting. It will give you a good idea of how much you can borrow and, in turn, how much you can afford to spend on your new home.

How does it work?

When you apply for an agreement-in-principle, the lender will do a credit check to see if you are a suitable candidate for a mortgage. They will also take into account your income, outgoings, and any other financial commitments you may have.

Once they have all this information, they will give you a decision in principle, which is a statement saying that they would be willing to lend you a certain amount of money to buy a property.

At this point, the lender has not checked the details of the property you want to buy and they will not have done an official valuation. It is important to remember that the agreement-in-principle is not a guarantee that you will get the loan, but it is a very good indication that you will.

Why do you need it?

Getting an agreement-in-principle is essential before you start looking for a property. It will give you a good idea of how much you can borrow, which will help you set a budget and narrow down your property search.

Having an agreement-in-principle will also put you in a better position when it comes to making an offer on a property. Sellers are more likely to accept an offer from a buyer who has a mortgage in principle, as it shows that they are serious about buying the property and that they are financially stable.

Finally, having an agreement-in-principle can speed up the mortgage application process. Once you have found a property and made an offer, the lender will have already done a credit check and assessed your financial situation, which means that the full mortgage application process should be quicker and easier.

What do you need to get an agreement-in-principle?

In order to get an agreement-in-principle, you will need to provide the lender with some basic information about yourself and your financial situation. This may include:

– Your name and address

– Your income and outgoings

– Your employment status and history

– Your credit history

– Any outstanding loans or commitments

You can apply for an agreement-in-principle online, over the phone, or in person at a lender`s branch. It is a quick and easy process, and you should receive a decision within a few days.

In conclusion, an agreement-in-principle is an essential part of the mortgage application process. It gives you a good idea of how much you can borrow, which will help you set a budget and narrow down your property search. It also puts you in a better position when it comes to making an offer on a property, and can speed up the mortgage application process.