An Agreement in Principle, also known as a Mortgage in Principle (MIP) or a Decision in Principle (DIP), is a statement from a lender indicating that they would, in principle, be willing to lend you a certain amount of money to purchase a property.
This is not a guarantee, but it gives you as a home buyer a clear indication of what you could potentially borrow based on your income, debts, and credit score when officially applying for your mortgage.
Why is this useful?
A Crucial First Step
Knowing how much you could potentially borrow helps to set a realistic budget when house hunting.
It is useful to have this before enquiring into a property to avoid wasting both yours and the sellers’ time, in the event the property exceeds your budget.
Credibility with Sellers
An Agreement in Principle can help demonstrate to sellers that you are a serious buyer with potential financial backing, making your offer more attractive.
This can also make you more credible compared to other potential buyers without an Agreement in Principle.
Getting Ahead of the Game
Having an Agreement in Principle can speed up the full mortgage application process as the lender will already hold some of your details.
A Proactive Approach
This document can highlight any potential issues in your credit history early in the property purchasing process. This allows you time to address them before you find a property you want to buy so as not to get in the way of securing your dream home.
Peace of Mind
It provides assurance about how much money you will require within your budget when looking at the bigger picture. It allows you to budget for other costs associated with purchasing a property such as solicitors, stamp duty, and general moving expenses.
How Long is the Document Valid for?
An Agreement in Principle is typically valid for 60-90 days. However, this can vary between lenders, so it’s important to check the specific validity period with your mortgage provider.
In conclusion, obtaining an Agreement in Principle is a vital first step for all those looking to buy their first or next home, talk to us today to discuss your options and get your property purchase journey moving!
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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