As you are asking this question the chances are that you are considering buying a property and have been told that you need a mortgage decision principle. By the end of this mortgage guide you will understand what a mortgage decision in principle is and everything you will need to do prior to getting a mortgage decision in principle.
So, what exactly is a mortgage decision in principle?
A mortgage decision in principle is a decision from a bank or building society that they are willing to lend you a pre agreed amount of money for you to be able to buy a property. This is more than often the first step you’ll take prior to looking for a property to buy as it will let you know how much you can borrow and also that you will be good for your money when making offers on houses.
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How do I get a mortgage decision in principle?
You can go to any bank or building society and ask for a mortgage decision in principle however it makes sense to choose who you go to wisely. Each lender has different criteria and the way they look at applicants. It is important that you get a lender that matches your criteria. The easiest way to make sure you get this right is to contact an independent mortgage broker. The mortgage broker will have a meeting with yourself and ask what you are hoping to achieve. They will ask some questions that the lenders will want to know for example who you work for, How much you earn and any debts that you may have.
With the information you have given the mortgage broker, they will be able to advise who will lend you what you want to borrow. They will take into consideration the interest rates being offered by the different lenders. With over 14,000 mortgage available getting a mortgage broker working closely with you will be important.
Recommended: How long does a mortgage application take?
Will a mortgage broker charge me for their services?
Not necessarily! Although some mortgage brokers do charge a fee, you will find that there are mortgage brokers that get do not charge a fee.
How do I find a no fee mortgage broker?
Ask your friends or family if they have bought or remortgaged a property. Ask them which mortgage broker they used. Another alternative is a google search. Search for a local no fee mortgage broker. See what companies are suggested. Take a few minutes and look at the different brokers websites. Look at their business reviews on google maps. Have a look at their facebook page and reviews and see what other people have experienced.
Will lenders carry out a credit check?
Whenever possible it makes sense to avoid a credit check being carried out on you however some lenders will carry out a credit check as part of the mortgage decision in principle. Although this is not something to be alarmed about your mortgage broker will know which lenders do and which lenders don’t carry out a credit check. In the last couple of years the number of lenders that carry a credit check has reduced significantly with the majority of banks and building societies no longer needing one.
What do lenders look at to decide if they will give a decision in principle?
Lenders will look at many aspects when making a decision if they will give you a mortgage. The main thing they look at is your credit file. They will often use a credit agency like Experian or Equifax who will look at your past financial track history.
Depending on what loan to value you are borrowing will depend on how deeply different banks and building societies will look into your credit file. At a high loan to value for example 95% you will need an almost a perfect credit file. As your loan to value lessons the less important it is to have a perfect credit file. Do not spend any time worrying about this. Talk to your mortgage broker who will be able to help and advise you on this.
How long will a mortgage decision in principle last?
This varies from lender and tends to be either for 3 or 6 months. Because you don’t know how long it will take you to find a suitable property it will most probably be wise to get a mortgage in principle for a lender that will last 6 months. Once again your mortgage broker will know which lenders mortgage in principle last 3 months and which last 6 months.
Are mortgage decision in principles and agreement in principles the same thing?
You will find that estate agents, mortgage brokers and lenders will call the mortgage decision in principle an agreement in principle. Don’t worry, they are basically different names for the same thing.
Is it compulsory to have a mortgage decision in principle?
Mortgage in principles are not compulsory. Quite often people will find a property first as they didnt know they needed a mortgage in principle. This is slightly risky and may lead to disappointment as you may not be able to borrow the amount you require to proceed on the property you have found. It also can result in everything being a rush as estate agents may require a
So I have got a mortgage decision in principle. What happens next?
Once you have a decision in principle in place it’s time to go and find a suitable property. There is no need to rush. As you have a 6 month window to find somewhere and if it takes you longer than 6 months there is no reason why your mortgage broker can’t get you another. Most estate agents will want to see your decision in principle prior at the time of you making an offer on a property. The reason behind this is the estate agent has a duty of care to the owner of the property who they are working for that you would be able to proceed financially if your offer is accepted.
Is there anything I should do before getting a decision in principle?
Getting a mortgage decision in principle is a great milestone on your journey of buying a property however there is quite a lot that you will need to do before this. As previously mentioned find yourself a no fee mortgage broker you can work alongside. Not only will the mortgage broker be able to advise you of possible lenders that fit your criteria they will also search over 14,000 mortgages to find out which lenders are offering different incentives. Many banks and building societies offer great incentives to first time buyers including free valuation surveys and cash backs.
A good mortgage broker will have a planning meeting with you before you even start to look for properties and as well as produce the agreement in principle they will give you advice on how to find a suitable property. How to make an offer. If the market is fast or slow in the area you are looking and whether you are likely to need to offer the asking price or if the market is allowing offers.
Ideally a few months before you get a decision in principle, there are a few things that you get in order.
- Make sure you are on the electoral roll. Each applicant will need to be on the electoral roll or you may have big problems in obtaining a mortgage! If you have had voters cards delivered to your address recently this will be a sign that you are on the electoral roll. If in doubt call the local council offices and get confirmation.
- Make sure that you don’t do any no online gambling. Lenders have a strong dislike to any gambling. Hopefully you don’t have a track history of online gambling however if you like the odd flutter on the football now is the time to stop as it will almost definitely stop you getting a mortgage!
- Get your financial ‘house’ in order! Lenders will often need to see between 3 and 6 months bank statements for a mortgage application so now is a good time to tidy up your accounts. Get out of any overdraft. Make sure all credit cards and loans are paid on time. Generally take your account and finances more seriously and increase your savings.
Need a mortgage decision in principle?
Make contact with us at YesCanDo Money. We have a team of friendly advisers who will be more than happy to help you get a mortgage decision in principle and along with this will provide lots of free advice. YesCanDo Money are a NO FEE mortgage broker so it won’t cost you a penny. We are a family run mortgage broker located near Portsmouth in Hampshire near Chichester however we cover the whole of the South of England.
So, how long does a mortgage application take to be approved?
Although in some circumstances this can take as little as 24 hours, you should expect to wait about 2 weeks on average while the mortgage lender gets the property surveyed and underwrites your mortgage application.
The intention of this guide is to give you an idea of how long each step of the mortgage application process takes from seeing a mortgage broker and getting a mortgage agreement in principle, to getting a mortgage application underway once a property has been found and getting a mortgage offer. Then onto the exciting part of completing, picking up your keys and owning your very own property.