What is an agreement in principle or decision in principle? Zita Latham, Mortgage Broker Surrey UK

Описание: Should you or should you not get an agreement in principle or decision in principle prior to your house hunting process?

What is an agreement in principle or decision in principle? So this is a piece of document which is provided, issued by a lender identifying how much you can borrow based on your income and outgoings, but also it's stamped with a credit search.

They also look at your credit history and whether you are creditworthy and whether they can lend you the funds. So that's basically what it is. Plus, an estate agent will ask for this document and more likely the seller is not going to accept your offer until they have this until the agreement in principle, decision in principle is ready.

Why?

They want to know that you're credit worthy. They want to know that you can borrow the funds and therefore you can buy this property. They want to be sure you, they don't want to waste their time. They want to be sure that you are the right buyer for that property and you can get the funds in place. So where can you get this document from? You could go on a lender's website and create one yourself.

But if somebody has a basic salary, has some allowances, has some overtime, some bonuses, perhaps has two jobs, several different income in the background, then it isn't as straightforward how you enter the income. Also, some lenders won’t accept certain income types.

Also, some lenders will perhaps, calculate less of certain income. Quite a lot of lenders won’t accept a hundred percent of your overtime, commission or bonuses. So if you put it into the wrong section and they calculate more than what they should, then that will give a false result. So this is one of the key issues when somebody is creating their own agreement in principle, decision in principle.

But again depending on your overall circumstances. But if for example, you are a contractor, then different banks will accept a contractor's income based on length of that contract, how many months left on that contract when you started contracting and so on. So can be quite complex and complicated. Self-employed income is quite complicated.

So if the lender doesn't accept that income and you still use that income in the agreement in principle, it will give again a false result. False result means that you might apply for a £300,000 mortgage. That's what you need. Something keyed in wrong, you went to the wrong lender, keyed information wrong. And you have a decision in principle of about the 300,000, which is great news. You make an offer, offer accepted.

However, later down the line when you actually apply for the mortgage, because I must emphasise a decision in principle or agreement in principle is not a mortgage offer.

This isn't official acceptance of your mortgage application.

It is only in principle you can borrow that money. So once you are at that stage where you make the official application and then either a broker or advisor check your documents at the time and find out that, this won't work because this information was keyed wrong. Or even worse, you do your application and you send it off to the lender and then the underwriter comes back to you that, sorry, we have to decline this because actually we can't accept this type of income, then it will cause a huge issue.

Maybe weeks if not months down the line it can all fall apart. If you can't get that £300,000 mortgage only £250,000 that's it, you can't buy that property. So extremely important that that decision in principle is with the right lender and actually based on the right information.

Also if somebody doesn't have a squeaky clean credit history or lower credit score for some reason, again, if you go to a specialist broker, we can actually identify this and we can avoid certain lenders who perhaps don't accept a CCJ. There are lenders out there who will accept a CCJ and some lenders don't.

A broker can identify the lenders who will just carry out a soft credit search and not a hard search (as that can actually damage your credit history and credit score).

Please get in touch - I will ask for those payslips, I will identify your income, I will have an in-depth conversation about your circumstances, so I will know who are the lenders who can consider your application and give you the funds.

I hope you find this video helpful.

#mortgagebroker #mortgageadvice

***

Welcome to Zita Latham Mortgages!

www.zitalathammortgages.co.uk
www.instagram.com/zitalathammortgages

Zita Latham Mortgages Limited is an appointed representative of Mortgage Intelligence Ltd which is authorised and regulated by the Financial Conduct Authority under number 305330 in respect of mortgage, insurance and consumer credit mediation activities only. Registered address: Zita Latham Mortgages Limited, 45 Nork Way, Banstead, Surrey SM7 1PB. Registered in England & Wales under number 13666781

Your home may be repossessed if you do not keep up repayments on your mortgage