It’s Agreement in Principle: What it Means and Why it Matters

When buying a property, you may come across the term “agreement in principle”. But what exactly does it mean? And why is it important?

An agreement in principle is a statement from a lender indicating how much they may be willing to lend you for a mortgage. It is not a guarantee of a mortgage, but rather an indication that, based on the information given, you could potentially borrow a certain amount.

Why is it important to have an agreement in principle before house hunting?

Firstly, having an agreement in principle can help you set a budget. It lets you know how much you are likely to be able to borrow, which can help you narrow down your property search to those within your budget.

Secondly, it can give you an advantage when making an offer on a property. When you make an offer, the seller will want to know that you can actually get the mortgage to buy the property. Having an agreement in principle shows that you are a serious buyer who has already taken the necessary steps towards securing a mortgage.

Finally, obtaining an agreement in principle can speed up the mortgage application process. Once you have found a property and had your offer accepted, you will need to complete a full mortgage application. Having an agreement in principle in place can help speed up the process as the lender has already carried out some preliminary checks.

So, how do you obtain an agreement in principle?

The first step is to speak to a mortgage advisor or lender. They will ask you questions about your income, outgoings, and credit history to assess your borrowing potential. You will typically need to provide proof of your income and identification.

Once you have an agreement in principle, it’s important to remember that it is not a guarantee of a mortgage. The lender will still need to carry out further checks before offering you a mortgage.

In conclusion, obtaining an agreement in principle is an important step in the house buying process. It can help you set a budget, give you an advantage when making an offer and speed up the mortgage application process. Speak to a mortgage advisor or lender to find out how much you could potentially borrow.