If you’re looking to buy a home, more often than not you will need a mortgage in principle. In this article, our team of expert mortgage advisors will help you understand what a mortgage in principle is, why you need it and how you can apply for one.
So, whether you’re a first time buyer trying to get on the property ladder or looking to move homes, our team of experts are on hand to help.
What Is A Mortgage In Principle?
A mortgage in principle (MIP), sometimes known as a decision in principle, or agreement in principle, is a document from an official lender stating how much you can afford to borrow from them in the form of a mortgage.
It is not a legally binding agreement but a useful indicator for knowing how much you could borrow when looking for a house. When you’re looking for a house, if you have a MIP, estate agents will take mortgage principles and their contents seriously, which could help you when looking for a house.
Do You Need A Mortgage In Principle To View Houses?
In most cases, it depends on the estate agent, some may insist you have a MIP before booking you in for house viewings.
It’s best practice to get a mortgage in principle if you’re serious about looking for and purchasing a house, as not only can it help speed up the process, but estate agents may take your position as a buyer more seriously too.
How Do You Get A Mortgage In Principle?
There are several ways you can go about getting a mortgage in principle, depending on the lender or mortgage advisor you go to. Some banks, including Nationwide and Natwest, offer an online ‘decision in principle’ service, where you answer a few simple questions, such as:
- Are you a first time buyer, moving home, remortgaging or borrowing more against your current mortgage
- Your nationality
- Employment status
- If you’re planning to use a help-to-buy-to-buy, right-to-buy or shared ownership scheme
- Questions about yourself and your financial situation
- Addresses for the last three years
- Income
- Any credit card, finances or loans
- Other regular outgoings
Alternatively, you could work with mortgage advisors like The Levels Financial and we will be able to help you with the process. We would ask for information such as:
- Personal information
- Budget / financial state
- Proof of address
- Proof of income with at least three months of salary and bank statements
The lender will then use the information you’ve provided to arrive at a figure that they would be willing to lend you ‘in principle’ for you to purchase your chosen property. They will then provide you with a letter or certificate stating the maximum amount you will be able to borrow from them potentially. This is then what you will provide as evidence for estate agents when booking or offering potential houses.
Please note, that you do not need to get a mortgage from the same lender that you received a mortgage in principle from.
How Long Are Mortgage In Principles Valid For?
In most cases, if your details, such as monthly income, regular spending and debts, don’t change, your mortgage in principle will last for 90 days.
Can You Get Refused A Mortgage In Principle?
It’s important to note that a mortgage in principle does not guarantee you a mortgage with that lender and it is possible to be refused a mortgage in principle as well as a mortgage. If your MIP is refused, it normally indicates that the lender has found something that didn’t meet the criteria when conducting their checks. For more information about what to do if your mortgage offer is refused, see our blog post: ‘mortgage offers withdrawn – a guide’.
Does A Mortgage In Principle Affect Your Credit Score?
Getting a mortgage in principle does not affect your credit score. Unlike applying for a full mortgage application, when you apply for a mortgage in principle a ‘soft credit check’ is completed. Rather than a ‘a hard credit check’.
Soft credit check – this is just a view of your credit eligibility which won’t impact your credit score
Hard credit check – this is an extensive look into your credit record
If multiple credit checks are completed in a short period of time, this could have a negative impact on your overall credit score. For more information about credit checks, see our blog posts:
- What can affect your credit score?
- 5 ways to boost your credit score with our Yeovil mortgage advisors
Do You Have To Pay For A Mortgage In Principle?
In most cases, obtaining a mortgage in principle will be free of charge from a lender or broker of your choice. Usually, you will only be charged once your mortgage deal is secure, even if that isn’t the same lender that you’ve had your MIP from.
What Happens After You Get A Mortgage In Principle?
It’s important to note that a mortgage in principle is not the same as a legally binding mortgage offer. So, once you’ve found your home, and an offer has been accepted you will then formally apply for a mortgage.
For more information about applying for a mortgage, see a range of our helpful articles here:
- Moving house? Our top tips when buying a new home
- All you need to know about variable rate mortgages
- Porting a mortgage, what it is, how it works and more
- Buy to let mortgages – your questions answered
- Your self-employed mortgage guide
How Can The Levels Financial Help With Mortgage In Principal Applications?
At The Levels Financial, our team of highly experienced and qualified mortgage advisors are on hand to help. Whether you’re buying your first home or have been through the process several times, we will provide you with all the support you may need.
Get in touch with our team of mortgage advisors today and book your free initial consultation today by contacting our friendly team at admin@thelevelsfinancial.co.uk or calling us on 01458 772040.
Because we always have your best interests at heart, you need to know…
- Your home may be repossessed if you do not keep up repayments on your mortgage.
- There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
- The fee is up to 1%, but a typical fee is 0.3% of the amount borrowed.
