Mortgage in Principle - needed before you start?

Jackies

Hi

Apologies if this question has been asked before, I've searched back quite a few pages and can't find anything.

DH and I are just starting out buying our first house. We're both first time buyers, and looking to have 25% deposit on a 250k property. When I spoke to a mortgage advisor a few months ago they told me over the phone, based on basic information, that we would get enough mortgage to cover the remaining 75%. This was not a formal mortgage offer.

He told us that we should look around based on what he's told us we could get and when we have an offer accepted, to come back to them to get the mortgage agreed officially (he suggested this so that we didn't have to have multiple credit checks). Now we're looking at houses officially, some agents have suggested that our offers may be taken less seriously as we don't have a mortgage agreed already. However I'm not keen to have a credit check now and then still be looking in 3/4 motnhs have to have it done again (I don't forsee any issues with the checks, but obviously don't want to have anymore than we need)

Would we be better off with a mortgage agreed in advance or are we better off waiting until we have a definite house in mind?

Thanks

KiKi

In my experience it's a bit chicken and egg; some buyers (and EAs) won't take you seriously if you don't have an Agreement In Principle in place, and they might ask the question. On the other hand, as you say, why do all that, only to take a year to find the right property. I personally would start looking around, make the offer and see the lender straight away - but I wouldn't start any proceedings (like a survey etc) without the AIP ready.

You might want to see how it goes with the EAs as you're viewing, see what they say. If most insist you have an AIP, you'll have to consider it! I was like you - they'd agreed, but nothing written down. I had to get it formalised within the week for them to accept the offer.

HTH
KiKi

bristol_pilot

With a decent % deposit, I reckon on balance that you are better off without a MiP. The problem with a MiP is that it tells the agent the maximum you can afford, thereby weakening your negotiation position. As a buyer without a property to sell, you are holding all the cards i nthe current market (although EAs are very good at making you feel otherwise).

Of course you can't apply for an actual mortgage until you have had an offer accepted.

jonny_power

I don't think it'll look too bad if you have a credit check for the AIP and then need a credit check when you search again and get your final offer for a product, we didn't have any problems anyway and that was for 90%LTV. If you think it's going to be a problem, there's nothing to stop you claiming that you have an AIP when you meet the vendor/EA. If they ask for proof then just say you're not willing to show it whilst negotiating.

tyler80

We got mortgage advice before we started looking. Then we got an AIP before we made an offer, mostly because that particular house was at the top of our budget so I wanted the AIP in place to be sure we could afford it. If we hadn't already had one in place I wouldn't have bothered getting one for the house we're buying as its less than 2x joint salary so would have been as confident as you can be that we'd get a mortgage on it.

Edit: We offered on two houses with two different EAs in total and were never asked to provide any proof of funds/AIP.

Jackies

thanks guys - interesting to see your opinions! I'll have a think about it abit more!

eamon

At the very least you should talk to your current bank and get all the affordability information from them i.e. how many multiples of you (and partners salary), fees charged, mortgage types, how much per month, mortgage term, the difference having a larger deposit will make, how to make over payments (yet remain fee free), the impact caused by having existing uncleared debt and would you actually get a mortgage (if they say no you can ask why and what actions you can do to make things different). You wont have shopped around as per the usual advice but at least you will have useful information to base future decisions on. There is no point in going shopping first, only to find later that you can't afford it.