There are many opinions on when you should get an agreement in principle but hopefully, we can shed some expert advice on the process and when you should apply for an agreement in principle.
1. Start by using an Affordability Calculator
When you are starting out with a property search either as a First Time Buyer or moving home, the first thing you need to do is to work out how much you could borrow by using an affordability calculator.
Use our quick Mortgage Calculator
If you have credit commitments (such as loans and credit card balances), you should use a more comprehensive calculator.
All mortgage lenders use affordability calculations to determine how much you could borrow. Lenders will use a general rule of thumb calculation and then apply their own private algorithms and adjustments to establish a final figure. They will factor in your monthly credit commitments and other regular monthly outgoings and this will affect the amount that you could borrow. The final figure that is presented in the affordability calculator will be subject to credit score and further assessment/eligibility checks.
However, the lender affordability calculators do actually give a pretty good example of how much you could borrow if you have been accurate with your figures. There are many lender affordability calculators online that you could try but a good independent one that we use is from the Money Advice Service.
The MAS website is also a good source for independent money advice, it has been set up and funded by the UK Government to offer impartial advice.
2. Get a mortgage illustration
Estate agents will tell you that you need to get an agreement in principle to show that you are a serious buyer. This is a very common sales technique to get you to sit in front of their in-house mortgage advisor. Often these agents are incentivised to make the appointment.
The truth is that you don’t need an agreement in principle to view a property. You also don’t want to be revealing your financial position to an estate agent in-house advisor.
An agreement in principle is an official approach to a single mortgage lender to request to borrow a specified mortgage loan amount based on a specified property price.
When you are viewing properties, your property criteria may constantly change and so then will your loan requirements. This is why we don’t recommend having an agreement in principle carried out at the start of your property search.
We always recommend that as long as you have carried out your initial research by working out how much you could borrow and have spoken to an independent whole of market mortgage advisor, you don’t need to get an agreement in principle until you have found a property that you like.
Here at Glow, you can quickly carry out a no hassle mortgage eligibility assessment that does not require a credit check.
If you want to go one step further, the next stage is to obtain a mortgage illustration. A mortgage illustration does not form part of any offer, contract or agreement to lend. However, it will illustrate how much your monthly payments will be and it will break down the lender fees and charges without a credit check.
3. Found a property you like? Now is the time to get an Agreement in Principle.
So you have checked how much you could borrow with an affordability calculator, had a chat with an independent mortgage advisor and received a mortgage illustration. Now you have been viewing properties, fending off the estate agent questions (attempting to delve into your finances) and you have finally found a property that you like.
You are thinking about making an offer. Now is the time to get an agreement in principle. Now your independent mortgage advisor can check the market again and work out the best option for you, check if rates have changed and align the most suitable lender. They will also check whether the property you have found meets lender criteria.
You can request another up-to-date personalised mortgage illustration and make sure that you are happy with any lender fees and the monthly payments. Once you are happy with the mortgage illustration it is then time to apply for the agreement in principle.
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Author: Ben, Glow Mortgage Advisor (CeMAP, BSc Hons)
First Published: 21st January 2018
Updated: 30th August 2020