Agreement in Principle

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Agreement in Principle (Part 1)

Rohit Kohli explains how an Agreement in Principle works. Episode one of two, recorded in December 2024.

What is an Agreement in Principle, just to recap?

An Agreement in Principle is basically a document from a lender stating how much they might be willing to lend you, based on some initial checks they’ve done. It’s often called an Agreement in Principle, and can also be called a Decision in Principle or a Mortgage in Principle. They all are the same thing.

Crucially, it’s not a guarantee of a mortgage, but it does give you a much clearer idea of your borrowing capacity.

What should I do if my estate agent is asking to see my Agreement in Principle? How do I get one?

It is fairly normal for an estate agent to ask to see your Agreement in Principle. They want to ensure that you’re a serious buyer and you’ve done the initial work to get the process started.

You can get an Agreement in Principle by speaking to a mortgage broker. We will assess your circumstances and match you with a lender. Once we’ve done our due diligence and checks, you secure your Agreement in Principle.

Do I have to have an Agreement in Principle through the estate agent I’m looking to purchase through?

No, you don’t. Estate agents might suggest that their in-house services can provide you one, but you can use your own mortgage broker, or even go to a lender.

Using your own broker often gives you access to more competitive deals and impartial advice, as some estate agents use a restricted panel, which may mean they may not have access to lenders across the whole market.

Also, if you’ve already got a valid Agreement in Principle because you’ve already seen a broker, you don’t need to get another one – as long as it’s in date and valid. The estate agent will want to do their own due diligence checks on you, though. They are still regulated for anti-money laundering checks, so they still want to see your ID, your source of deposit and have a conversation with you.

How reliable is an Agreement in Principle? How long does one of these last?

Typically, an Agreement in Principle can last between 30 to 90 days – it varies between lenders. Some offer a longer period because they appreciate it takes a white to find the right property. Some are shorter because they’re offered on certain deals that are time limited.

An Agreement in Principle is only as good as the information that’s provided. As long as you’ve provided accurate information, it is usually fairly robust in terms of how much you’ll be able to borrow. That’s why it’s a good idea to use a broker – we will do checks, look at your documents and understand your circumstances first, so you can be fairly certain that it’s accurate.

Can I make an offer with an Agreement in Principle?

Absolutely, yes. That’s one of the benefits of having an Agreement in Principle. It strengthens your position as a buyer. It shows that you’re serious and you’ve already done the initial steps to move forward with the purchase – and that you are likely to secure financing.

From your own perspective, it gives you a great guide as to your budget and therefore can help you in your negotiations with the estate agent.

Does an Agreement in Principle mean you’ll get a mortgage?

It’s not a guarantee you’ll get a mortgage. The full application will include deeper checks on your income, your expenses and your credit history. But as I say, if you’ve gone to a broker, we would have done those checks first on your circumstances so you can have better confidence of securing a mortgage.

But also it’s dependent on the property you’ve made an offer on – it may or may not be suitable for the lender. That could determine whether you’ll get your mortgage or not, as well.

Will I need a credit check? Does an Agreement in Principle affect credit score?

Most lenders run a soft credit check for an Agreement in Principle. That doesn’t necessarily affect your credit score, but you don’t want to run lots of those. The hard credit check happens once we submit the full application. At that point, it does leave a footprint on your credit history, and shows that you are proceeding with an application.

How do I apply for an Agreement in Principle? How long does this take?

You can apply for an Agreement in Principle by speaking to a mortgage broker. We will assess your circumstances and look at your documents before matching you to a suitable lender.

Once these checks have been completed, we secure your Agreement in Principle and provide you with the details behind it: how much you can borrow and the type of product available to you.

Normally that can be done within 24 hours of your documents being assessed. The decision is instant with most lenders. Some like to manually review them, but it still can be fairly quick to get that done for you.

How can a mortgage broker help?

There are hundreds of lenders out there, and each one has its own set of criteria and circumstances that they’ll consider. Everybody is unique, so the most effective way to secure that mortgage offer is to speak to a broker who can match you with the most appropriate lender.

It’s going to enhance your ability to secure a mortgage. We streamline that process, saving you time and hopefully reducing any stress. Most mortgage brokers can also handle tricky situations like bad credit or self-employment as well.

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Agreement in Principle (Part 2)

We continue the conversation on Agreements in Principle with Rohit Kohli. Episode two of two, recorded in December 2024.

When should I get an Agreement in Principle?

As early as possible. Before you start any serious property search, you should speak to a mortgage broker to understand your options and find out what may or may not be possible for you.

Get your checks done and your mortgage broker will secure your Agreement in Principle. Having that ready will show estate agents and sellers that you’re prepared and financially ready to move forward. It shows you’re a serious buyer and are ready to go.

What information do I need to get an Agreement in Principle?

We’ll be looking for proof of your income with pay slips or, if you’re self-employed, your accounts or tax returns. We’ll need details of regular expenses and any outstanding debts you have. Usually we want to have a look at your bank statements as well, and a copy of your credit report.

Then it’s information about your deposit – have you saved it up, or is it being gifted? Where has it come from? It’s all about understanding your circumstances so we can start putting a picture together.

How is affordability calculated for an Agreement in Principle?

Lenders will assess your income, your regular expenses and any existing debt you have. They’ll look at all of those variables, plus your credit history and deposit. You put all that information in and it will calculate how much you can borrow. The combination of your income, expenses, debt and your credit history will determine how much you can borrow.

Is an Agreement in Principle guaranteed? Can my mortgage be declined after an Agreement in Principle?

It’s not guaranteed. By the time you get your Mortgage in Principle and then find a property, your circumstances may have changed. There could be a change in your financial situation, or when the lender does their deeper checks, they might find some issue behind the scenes we weren’t aware of that could lead to a decline.

But as I’ve said previously, if you speak to a mortgage broker who knows the lenders’ criteria, they will match you with the lender that’s most suitable for you. That will reduce the risk of a mortgage being declined.

Can I get an Agreement in Principle if I’m a First Time Buyer?

100%, yes. It’s often the very first step for First Time Buyers. It shows that you’re ready to proceed and you’re serious. It also gives you an opportunity to speak to an expert who can guide you through the whole process and help you understand the steps. It means you’re as prepared as possible for your journey into home ownership.

How will bad credit affect an Agreement in Principle?

Bad credit can limit your options, but there are lenders that specialise in working with people with bad credit. Many could offer mortgages, depending on your circumstances.

As a broker, we can help you find suitable lenders. Having bad credit won’t stop you getting a mortgage, but you might not pay high street interest rates. There might be some additional fees attached, or we might need to help you plan ahead.

You may need to wait a while before you can secure that mortgage. It is more challenging with bad credit, but it’s not impossible.

Is it harder to get an Agreement in Principle if I’m self-employed?

I wouldn’t say it’s harder, but perhaps more complex. However you’re set up, whether it’s a limited company, a sole trader or a partnership, it’s about providing proof of stable income to the lender. Having up to date tax returns or accounts makes the whole process easier.

Brokers are valuable here. They know which lenders are more flexible with self-employed applicants, and the documents lenders are going to need from you. We can really cut through a lot of the time you would waste shopping around lenders that just won’t deal with you if you’re self-employed.

I’ve been declined an Agreement in Principle, what can I do?

You need to find out why you’ve been declined. That’s the first thing. It could be due to a number of things. Perhaps you have some credit issues you weren’t aware of.

We find sometimes with First Time Buyers that they have not registered to vote at their address. They may not have a good credit footprint. It can affect you if you haven’t got much credit history, just like issues with your credit itself – and it could impact your affordability. Maybe your income wasn’t as expected or there was incomplete information.

Don’t be shy about speaking to whoever was securing your Agreement in Principle and trying to find out why it was declined. That’s the first step to understanding how you can fix it. Again, speaking to a broker can help identify alternative lenders and guide you through that process.

What are the benefits of getting an Agreement in Principle with a mortgage broker?

We access deals from across the whole of the market and can guide you to lenders that are suited to your circumstances. That makes it more likely your mortgage would be accepted when it comes to full application.

We know the specific requirements of different lenders and that increases your chances of success.
Crucially, we can help troubleshoot declines and help you prepare for a successful full application.

We get into the details with lenders. We can speak to underwriting teams and business relationship managers to get the right outcome for you.