What Is a Mortgage Agreement in Principle and Do I Need One?
If you are preparing to buy a home, you may have been told to get a mortgage agreement in principle before you start making offers. But what exactly is it, and do you really need one?
What is a mortgage agreement in principle?
A mortgage agreement in principle, sometimes called a mortgage in principle or decision in principle, is an indication from a lender of how much they may be prepared to lend you.
The lender will usually look at information such as your income, regular outgoings, deposit and credit history before providing an estimated borrowing amount.
If you have been searching for an agreement in principle mortgage, this generally refers to the same stage of the process, getting an initial indication of what a lender may be willing to offer before submitting a full mortgage application.
It is important to remember that an agreement in principle is not a guaranteed mortgage offer. Your full application will still need to meet the lender’s criteria, and the property itself will also need to be acceptable to the lender.
Do I need an agreement in principle?
You are not legally required to have one before viewing or making an offer on a property, but having one can be very useful.
An agreement in principle can give you a clearer idea of your potential budget before you begin your property search. It can also demonstrate to an estate agent or seller that you have already started looking into your mortgage options and may be in a position to proceed.
For first time buyers in particular, this can make the house hunting process feel much more straightforward.
Does an agreement in principle affect your credit score?
This depends on the lender. Some lenders use a soft credit check when considering an agreement in principle, while others may carry out a hard search.
Before proceeding, it is worth understanding what type of credit check will be completed, particularly if you are considering more than one lender.
Get prepared for your first mortgage
Before looking for an agreement in principle, you can use the Zest Money Group mortgage calculator to explore how different mortgage amounts, interest rates and loan periods could affect your monthly repayments. Then get in touch with the Zest team who can provide this for you as part of the serviceÂ
Our mortgage brokers can review your circumstances, help you understand how much you may be able to borrow and guide you through obtaining an agreement in principle before you start searching seriously for your new home.
