One of the most critical steps in the home buying or Remortgaging phase is being Approved in Principle for a mortgage. Going through the mortgage application process can be difficult for many borrowers.
Thankfully, assistance is available. If you’ve had trouble getting accepted for a mortgage or just want some advice before applying, you’ve come to the right place to find a specialist broker who can assist you with the mortgage application process.
Qualifying for a Mortgage as a First-Time Buyer
Consider a mortgage pre-qualification as a learner’s permit, and a preapproval letter as a driver’s licence in the world of homebuying. A pre-qual letter can help you get started on the path to homeownership, but it doesn’t mean you’re ready to take the plunge. You’re in the fast lane with a preapproval message.
In order to get an Agreement in Principle form a mortgage lender we will need to give the lender a certain amount of information such as how much you earn, how long you have been doing your job, what debts you have and how you have maintained those debts.
They then run a credit check and after considering these and many more things, the lender will then come back with a decision. If the decision is yes, they will then give you an AIP certificate which you can give to estate agents to prove you have your AIP and are ready to make offers on property. After you have your Agreement in Principle you can start looking for properties and arrange viewings and make an offer on a property if you find the right one.
Mortgage Agreement In Principle or mortgage offer?
When you’re not sure whether you’re financially ready to buy a house, obtaining an Agreement In Principle is the first step. An Agreement in Principle for a mortgage is an initial agreement to lend you the money. You should get one of these BEFORE you start looking for a property.
You provide the lender with information about your credit, debt, profits, and properties, and the lender determines whether you are eligible for the mortgage you are applying for.
A mortgage offer is a formal offer to lend you the mortgage. This normally happens when you have your Agreement in Principle and you have found a property you wish to buy. You then apply for the mortgage on the property you are buying and after valuation and references such as looking at your payslips and bank statements etc, the lender will give you an informal mortgage offer. In short, it’s an offer from a lender to lend you a certain sum of money on specific terms. The offer is only valid for a limited time, such as 90 – 180 days.
A lender pulls your credit report and looks at documentation to check your wages, properties, and debts as part of a mortgage application. You can skip the Agreement In Principle stage and go straight to a full mortgage application to apply for a formal mortgage offer but you can only make a full mortgage application if you have a property you have had an offer accepted on.
Steps to getting a mortgage preapproval
Get your credit report and score before you contact a lender, make sure you know where you are. It is recommended that you have a credit score of at least 620, and a higher credit score would qualify you for better rates. Many borrowers may apply for the best mortgage rates with a credit score of 740 or higher. Each different lender has their own credit scoring system so just because one may have said no another may not.
TIP: It would be a great idea to get yourself on the electoral register before you apply for an Agreement in Principle because this counts as a large chunk of your credit score. Being on the electoral register could be the difference between you getting a yes rather than a no form the lender.
Check your credit history
Obtain copies of your credit reports and file a dispute if there are any mistakes. If you discover unpaid accounts, work with creditors to address the problems before submitting your application.
Calculate your debt-to-income ratio
The amount of your gross monthly income that goes toward debt payments, such as credit cards, student loans, and car loans, is known as your debt-to-income ratio, or DTI. Borrowers with a DTI of 36% or less, including the mortgage, are preferred by lenders, though it can be higher in some situations.
Obtain information on your earnings, financial accounts, and personal details. This includes yours and your co-borrower’s National Insurance numbers, current addresses, and job details. You’ll also need details about your savings and investment accounts, as well as evidence of income.
It is preferable to have two years of continuous work, although there are exceptions. Self-employed applicants would almost certainly be required to submit two years of tax returns to access a larger share of lenders in the marketplace, but some lenders will accept one year’s trading as a self-employed person.
Contact more than one lender
You may find that one lender makes it easy to apply for an Agreement in Principle online, whereas another lender may work with you to remove barriers to your approval. You could search the market yourself but there are drawbacks to this. Contacting one of our expert brokers means you speak with one person, and we will search the whole market for you to find the best deal in the market otherwise you could spend days searching many different lenders for a deal and you are still not guaranteed that deal is the cheapest. Another thing to be conscious of is if you search the market yourself and do lots of Agreements in Principle then this affects your credit score and can adversely affect your ability to get a mortgage.
What is the criteria for mortgage approval in the UK?
Getting approved for a mortgage can be a simple process for many people, rather than the intimidating experience that some people fear. However, there are a few things that can make the application process more complicated.
In general, approval is dependent on a few main factors:
Affordability – What is the maximum amount you can borrow? Is your salary sufficient?
Deposit – Do you have enough? Is the source acceptable?
Credit history – Have you ever had any credit problems? If this is the case, you will need a larger deposit.
Most mortgage lenders would accept you if the mortgage were easily manageable, your income is consistent, you have a sufficient deposit, and you have a good credit history.
However, if your situation is even slightly off-kilter, you can have trouble finding a mortgage lender who will accept your application.
You may have a tougher time finding a lender if you have bad credit, are self-employed, are purchasing a property with non-standard construction, or are simply in unusual circumstances. Whatever your case is, our expert mortgage brokers will find the right lender.
What documents do you need?
You’ll probably be asked for multiple items for the bank / your solicitor to establish some things about your condition in order to get your mortgage accepted. In general, the following documents are required for your mortgage application:
- ID (Passport/drivers licence)
- Proof of home address (utility bills/council tax statements)
- Proof of income (payslips / self-employed accounts or tax returns)
- Outgoings (bank / credit card / mortgage statements etc.)
Since each mortgage lender varies in terms of what they will and will not consider in terms of paperwork to support your mortgage application, you should ask your advisor for this a list of information they require before beginning the search for the best lender for you.
Every mortgage lender has their own set of requirements and definitions of what constitutes a suitable income. It would be difficult for an adviser to give you an accurate Agreement In principle without seeing proof of your income , for example.
How long does it take to get a mortgage approved?
If your application is easy, you can be approved for a mortgage in one or two weeks. If your case is more complicated, it may take longer. The majority of mortgages take between 18 and 40 days from the time you submit your application to the time the lender approves it.
The amount of time you’ll have to wait for your mortgage to be accepted is determined by your financial situation as well as the lender you’re applying to.
Almost every service provider divides an application into two parts:
- Agreement in Principle
- Full underwritten application leading to mortgage offer
An agreement in principle (AIP) is essentially a mortgage pre-approval based on the information provided and the customer’s credit score according to that lender – but the lender may want to review additional paperwork to ensure the information is correct. The AIP is frequently a good indicator that the mortgage will be accepted after the full application is submitted. Finding the best provider can be completed in a matter of hours and the AIP can be done within 30 minutes.
How long does it take to complete after mortgage offer?
Most mortgages take 3 to 4 weeks to complete from the time they are. Offered to the time the mortgage goes through and completes. This of course is down to a few things. For example, if you are Remortgaging it can take only a couple of weeks but of you are buying a property then it depends if your seller has found a property to buy, if everyone in the chain is all going through ok, etc.
The lender has either automatically or manually reviewed the application in accordance with any paperwork submitted and is happy to authorise the mortgage subject to the property valuation being appropriate. When the property is approved, the mortgage will be officially confirmed as “offered,” which ensures the mortgage will be set up and ready to go when the solicitors and both parties are ready to complete.
If you receive your mortgage offer quickly, completion will take a little longer because your solicitor may not have begun all the legal tasks that must be completed prior to completion.
Complicated applications, such as those with bad credit, those who are self-employed, those with a low deposit, and those with a high LTV, will take longer for a variety of reasons:
Increased research time
More comprehensive application processes – more information is needed to make a decision (applications can need to be submitted on paper rather than electronically on occasion).
Underwriting procedures that are more detailed. The majority of the time, mortgage lenders who approve non-standard applications would manually underwrite them. A fully packaged application with all necessary paperwork will have to be submitted for review before an offer can be given.
Mortgage Agreement In Principle
An Agreement In Principle is essentially an agreement to lend to a customer prior to the discovery of a property and submission of a complete application.
It’s usually a certificate stating that the lender is pleased to accept the mortgage based on the details given so far and sometimes provides the maximum loan amount available to the borrowers.
What does the mortgage Agreement In Principle process in the UK involve?
The method of obtaining an Agreement In Principle in the UK is very different now than it was years ago, and the meaning of the Agreement itself has changed for many borrowers.
Having an Agreement In Principle is not a guarantee of a loan, but rather an indication that the lender can lend.
Credit scoring models were created in order to make a more accurate lending decision up front. However, in recent years, lenders have put a greater emphasis on document review and an overall evaluation of the case at the full application level. Lenders can only make a firm decision after reviewing all of the documentation.
This is due to a variety of factors, including:
- The abolition of self-certified mortgages
- The introduction of more stringent document checks
- MMR and more strict affordability requirements
- Increases in the numbers of unique working contracts (such as agency, casual, zero hours, and umbrella companies)
- Increases in the number of self-employed applicants
- MMR has placed greater responsibility on mortgage companies to assess affordability which has increased both the questions asked and hoops to jump.
Mortgage Agreement in principle
To proceed to the full application stage, borrowers must pass the initial Agreement in Principle (AIP) stage. The full application can only be submitted after your bid on a property has been accepted.
Many prospective buyers are frustrated when they make an offer on a home, they love based on an AIP only to find out that despite having all of the evidence, a lender would not give them the mortgage they need.
Being turned down at this stage can be very discouraging and cause a lot of stress. Worse, it can be costly because providers can only consider the application after initial costs and valuations have been paid, which are usually non-refundable.
This is just one of the many advantages of working with a professional broker like ours. An experienced mortgage broker will recommend a mortgage lender and deal which they feel is the cheapest available to you and has the largest likelihood of being accepted for a formal mortgage offer.
The broker should also consider deferring the valuation before the mortgage has been approved by the underwriters. While this is not a normal practise, it can be extremely beneficial, however some lenders instruct the valuation upon submission of the application because they want the commitment from you to know you are serious about your application. Most high street lenders will offer a free valuation these days therefore if the mortgage is not approved then you have not lost any money.
Do I need a pre-approval for a mortgage?
The AIP is relevant because you’ll need to know whether you’ll pass the lender’s credit tests, and you’ll if you can borrow the amount you need. Your mortgage adviser will let you know how much you can borrow.
The AIP assists estate agents and vendors, in eliminating time wasters. They are always keen to ensure that someone making an offer on a property has the financial means to do so, in order to avoid any lengthy sales to buyers who would otherwise have been able to afford the transaction.
When to get mortgage Agreement In Principle
AIPs are usually valid for up to one month.
It’s always a good idea to get the AIP in place before you want to buy, so you know your ready to apply for the mortgage and you have an idea of how much you can borrow and what value of property you can afford to buy.
If you plan to buy in six months, an AIP might not be necessary, but speaking with an expert to ensure that what you want to do is realistic is always worthwhile. Otherwise, you could end up spending the next six months searching for homes you can’t afford.
Borrowers also ask us for an Agreement In Principle, which we can provide. For these circumstances where pace is urgent we can provide an Agreement In Principle the same day.
Where to get a mortgage pre-approval
You can go to your bank, or you can go to a few, or you can hire a skilled broker to find the best deal for you. As previously mentioned, if your situation is or isn’t straightforward, we always suggest working with our brokers who are familiar with the market.
Can I get a mortgage approval online?
You can get a mortgage Agreement In Principle online with our advisers, but keep in mind that they will need to check your identification and income in accordance with FCA guidelines, which will require original documentation to be mailed, obtained, or uploaded.
How much does it cost to get an Agreement In Principle?
While getting a mortgage approved is normally free, some brokers will charge commitment fees to ensure borrowers use their services – don’t be put off by this; it’s standard practise because getting the AIP requires a lot of effort, and few people are willing to work for free. Mortgage Saving Experts will obtain an Agreement in Principle free of charge for you.
Online mortgage approval calculator
For a rough estimate of how much you could borrow, try out our mortgage approval calculator tool:
Chat with one of our experts for a precise mortgage estimate. They would be able to consider all of the variables that influence what a lender is willing to give you.
Mortgage approval with bad credit
It is also possible to get a bad credit mortgage approval whether you have a poor credit score or bad credit b ut it does depend on what bad credit you have had.
The method of obtaining an Agreement In Principle for borrowers with poor credit is the same as any other person without bad credit .
begins Most people with good or bad credit will get pretty accurate instant decisions. Sometimes Specialist lenders who specialise in bad credit mortgages prefer to use more manual procedures.
Agreements In Principle for poor credit mortgages provide a clear indicator that the loan will be accepted subject to valuation and referencing. The Agreement In principle is normally sufficient to satisfy your estate agent that you are able to apply for a mortgage.
Contact us if you have a low credit score or a history of bad credit because this is one of our many specialist areas. We’ll gladly answer all of your questions and have the expertise, resources, and experience to match you with a lender who can offer you the best mortgage price.
What is the minimum credit score for mortgage approval?
A good credit score isn’t needed for mortgage approval, but it certainly helps. If you already have copies of your credit reports then please give that to our Advisers as these will tell us all we need to know and well tell us which lender, rate and deposit you will need for your mortgage.
Each mortgage lender has their own credit scoring system. For the same application, one provider will give you a pass and another a fail; it all depends on their assessment of the risk you pose for being able to afford the mortgage they give you and their willingness to lend when you apply.
If you haven’t already done so, you can get your credit reports from either Transunion, Experian or Equifax.
Agreement In Principle if you’re self-employed
When it comes to getting a mortgage as a self-employed individual, the application process is the same as it is for any other borrower, and you can still get an Agreement in Principle.
Since each lender will evaluate your application differently, it’s important to be upfront about the quality of your income from the start.
The following variables have an effect on which providers you can use:
Length of time you have been trading
Just a few lenders would accept your application if you’ve only been trading for one year. Even if you’ve only been self-employed for a year, you can get a mortgage.
Profit and accounting history
Many lenders use an average of the previous three years’ revenue, others use the previous two years’ income, and a few specialist lenders use the most current year’s figures. If your income has stayed stable over the last three years, you should be able to borrow from most lenders; if your income has risen recently, only a few lenders will use the higher figures; and if your income has declined, mortgage providers are likely to use only the lower, more recent figure.
Sole traders = your net profit
Partnerships = your share of net profit
LTD company directors = salary + dividends or your share of net profit for the company – corporation tax + salary
(Some specialist lenders may consider a share of net profit from Limited company directors, enabling you to borrow using your retained profits.)
The overall borrowing on self-employed mortgage approvals can be difficult to quantify, but for certain specialist lenders, borrowing can be up to 5x your income.
Most mortgage lenders will proof of your personal earnings from the company over the previous two years. You can prove your self-employed income by providing SA302s, Tax Computations and tax year Overviews or SA100s
In some cases, you will be asked to include a reference from your accountant to verify any questions the lender may have. Your accountant must possess the necessary qualifications.
You will also be required to include standard documents such as identification and proof of address.
Agreement In Principle certificates
Most estate agents will need proof that you have the financial means to buy the property before considering your bid.
This is usually an Agreement In principle Certificate or a letter from our adviser to confirm you have been agreed in principle because not all lenders provide AIP certificates.
Some lenders will also state the maximum amount they will lend you or the amount you have applied for.
An Agreement In Principle is no guarantee
estate agents and home sellers will know that any offer you make is legitimate if you have an Agreement in Principle certificate in your pocket.
It isn’t, however, a guarantee. , After the agreement in principle, you will apply for the mortgage when you have found a property and the lender does not have the obligation to lend to you or indeed on the property you have chosen as they will check your income via payslips and possibly check bank accounts to assess your ability to afford the mortgage Before a loan will be formerly offered to you , other measures must be completed, such as a home assessment.
Call us on 01273 738 072 or contact us by email and one of our experienced advisers will go through your options and help you in any way they can. They will be happy to answer your questions and find the right mortgage for you.
A good broker not only knows the market, they know your market
What we mean is that while most mortgage brokers claim to be ‘whole of market,’ they simply work with a lot of consumers who are considered straightforward borrowers. These brokers handle a large number of mortgages, often obtaining the best rates for their clients. All of them are excellent at it.
However, most brokers will fail to know how to help a client who has bad credit, uncommon self-employed profits, or just a special situation that the broker hasn’t encountered before.
With many years of experience our brokers will browse the rates for banks and building societies before they find one that suits you. This can be a lengthy process, and if the broker doesn’t completely comprehend the situation or know which mortgage lenders may accept the applicant, they can give up before seeking a solution or worse still recommend the wrong lender or interest rate and have wasted your time. We won’t do that because we know what we are doing. If we can help you then we will but if we cannot we will try to give you a clear concise way forward and advise you what you need to do to be able to get the mortgage you need to buy your new home because we may not be able to help you now but you may only have to wait a few months or maybe a year but at least you will have a clear way forward and know what you have to do.
In a more specialised situation like this, the method of having a mortgage approved can be somewhat different, and it’s critical that each application is addressed correctly so that underwriters can recognise the reasons for lending and offer the best possible chance of approval.
Before the customer even comes through the gates, a professional broker, who deals with these types of applications on a regular basis, already knows how to get a mortgage approval.
Speak to our expert advisers about an Agreement In Principle today
If you have any further questions about an Agreement in Principle or anything to do with mortgages at all or are ready to start an application, call 01273 738 072 or enquire to speak with one of the expert advisers.
Our professional advisers have experience assisting customers in similar situations. We are whole-of-market brokers who have access to lenders around the UK and the expertise and resources to assist you in obtaining the mortgage you need.
We provide a no obligation service and we won’t damage your credit score. Let us help you save time, effort, and money by matching you with the right mortgage lender the first time.