Mortgage in principle valid for 3 months but what does it mean specificly?

mavala25

After the house sale falling through on the original property I was going to buy, i have looked about and have found another I intend to put on offer on.
My question is my mortgage in principle last 3 months, but what Im not clear on is is it ok to have just put my formal mortgage application in before the 3 months is up or do I have had actualy exchanged (or completed) within that 3 months?
I hope this makes sense!

sonastin

AFAIK Mortgage in principle only means that based on what the mortgage co know about you at that time, in principle they would be willing to lend that amount but it is subject to details of the property, finding out more about you, current lending criteria, etc once you make the formal application. They only put an expiry date because they realise that your circumstances and their lending criteria are likely to change over time.

Once you have found your place you can submit a mortgage application without ever having a MIP, with an expired MIP or while it is still current. The mortgage offer for that property will have an expiry date on it too. I believe that you have to have exchanged before that expires but you might need to have completed as well - I'm not too sure but if my purchase goes on much longer I'm sure I'll find out! However that mortgage offer is only good for that particular property so if the purchase fell through for whatever reason, you would have to start again with a new mortgage application for the next property.

Hope that helps

mavala25

Ok, so really I neednt worry about having a MAIP at all then if I can just go straight in for the formal mortgage agreement on the desired property?
Is that right? Makes sense I suppose.
This 2nd house im going for is actualy cheaper than the 1st so I know based on my circumstances (being the same as before) they would be willing to consider lending the amount required.
The formal mortgae offer for the 1st house was approved it just we pulled out a few weeks before exchange due to structual problems.
Im hoping since our circumstances havent changed amd im applying for the same product with the same lender I will pass/be agreed the formal application for this 2nd house. Do you think I would encounter any problems getting approved?

sonastin

If they have approved you already for a higher amount then the only things you need to worry about are:
1) have they changed their lending requirements. Not a lot you can do to find that out or influence them on this one I'm afraid; and
2) whether they are prepared to lend that amount on that house. It all depends on the LTV requirements of that product and what the LTV is going to be on the house you now want to buy (based on their valuation of it). e.g you have 50k deposit and the first house was 200k so you were borrowing 150k at LTV of 75%. Now you still have 50k deposit but the house is 180k so you're borrowing 130k at LTV of 72% so should be fine. Except the bank only values this house at 170k which means the LTV is acutally 76% so they might not be willing to offer more than 127.5k - you would have to find another 2.5k or reduce your offer...

mavala25

Cheers thats good advice and what i thought might be the case.
I think my main concern is probably how a 2nd formal mortgage application would look on my credit file, since I only put the last application in about 5 weeks ago (which was approved). I thought the 1st application may bring down my credit score therefore having a negative impace on my 2nd application.
Truth be told im not sure how this credit profile thing works and whether 'credit scores' are decreased or just 'footprints' are left on your credit file and whether this is even a negative thing.

sonastin

I think if its the same mortgage co, they will recognise their own footprints so-to-speak and will know why you are submitting another application. I didn't have a problem credit-score-wise when my first application went in in May and after that fell through, the "change in material details" (ie. a whole other house!) application went in in July. I don't know how it looks if you make the second application with a different mortgage co though because I'm never too sure what the credit check thing really bothers about either!

mavala25

Thanks, this all makes good logical sense, i think sometimes you need someone else to say it to you.
Thanks for taking the time to reply.
It is the same mortgae company so fingers crossed

sonastin

Good luck with it