Agreement in principle?

keepsaving!

Just hoping I can canvas a few more opinions on whether it is better to get an agreement in principle before speaking to EAs and looking at property? A couple of friends have said definitely get one, as estate agents will take you more seriously, but a mortgage broker has said given that these agreements don't last for very long, it doesn't make sense to do unnecessary extra credit searches by getting an agreement too early that might expire...I know either way is probably fine but just wondering what others thought?!

kingstreet

An AIP provides a useful indication of your borrowing power. I'm not sure I agree with the broker's view. He is correct that it will expire, but the question surely is, how can you be sure the lender you approach for the AIP today will be the lender which ultimately offers you the best deal in a few months time?

I've often found I've obtained an AIP for a borrower with Abbey and ended up with a full application to Halifax (or vice versa) a few months later.

All I'd say is have just one AIP done, then wait until you find a property and agree a price before you decide on the product and lender which is best for you. At that point, submit a full application.

KateLiana27

You're right to be worried about the unnecessary credit searches, as applying for even an AIP will show up and potentially affect your credit score.

I would just work out the ballpark of what you could comfortably borrow, by an informal chat with a bank or advisor without an actual AIP. Then look at houses in this price range until you find one you want to buy and are ready to place an offer. At this point, apply for the AIP (can be done in a 10-minute phone call and paperwork within a couple of days) to show the vendor you have finances in place and are proceedable.

kingstreet

Two credit searches shouldn't be the difference preventing you getting a mortgage. In addition some lenders don't leave a footprint until full application. By all means, take care, but wasting your time and/or missing the chance to put something right early on more than make up for the risk of a second search.

KateLiana27

Old article but I still wouldn't risk it.

http://www.guardian.co.uk/money/2004/jan/11/mortgages.property

sunshineband

we have recently been going through the same process. Having spokent to the mortgage company directly they told us not to get the agreement in principle until we have made an offer on a property due to the credit checks being carried out. We were told the estate agents shouldn't need to ask you for proof of the mortgage etc until an offer is accepted and the sale is proceeding and shouldn't treat you any differently. The only thing that we had happen was they tried to get us to take a mortgage out with their preferred company (and our surverying, and life insurance etc) which we politely declined!!
Good luck!

G_M

How do you know what you can afford and what properties to look at if you have no idea what you will be able to borrow?

sunshineband

well we spoke to a mortgage company before hand and explained our situation (salaries deposit etc) and they advised us how much we would be able to borrow up to in theory (providing we had the deposit to support it), but we didn't go through the full mortgage application to get the AIP until we were in the position to need it.

keepsaving!

Thanks everyone, useful to get some other views on this. I think we'll have a look at a couple of places to see what EAs are like in the first place before getting an AIP, as this might not even be the right deal in the end. Having spoken to a couple of mortgage lenders for quotes and discussed our outgoings, loans etc they have all said they don't see any issue with lending what we want (quite a bit below the maximum salary multiple) which I know isn't anywhere near enough commitment, but you never know until the full application anyway I suppose.

keepsaving!

That article is pretty scary! :-)

kingstreet

This was the scary bit;-

"I asked six banks for an "agreement in principle", clicked the button that said credit searches would be completed"

as we seem to be comparing an advised maximum of two searches with a man who managed to undertake six.

If, like you keepsaving!, he'd asked anyone before he went ahead and did that, he would have been told in no uncertain terms to desist.

And do not, under any circumstances, accept an appointment with an estate agent's adviser. The bulk of them have limited panels of lenders and work on a fee plus commission basis, so you get the worst of all worlds!