When to obtain Agreement in Principle?

sirona

Hello everyone,

My partner and I are first time buyers and we have been looking at houses in central London for 2 months. We have spoken to 3 mortgage brokers (Alexander Hall and 2 independent brokers). We choose to work with an independent broker because (1) he seems efficient i.e. very enthusiastic and quick to reply to queries and (2) his fees schedule sounds reasonable: fees on completion date.

However, he advised us against getting an AIP straightaway because banks change their mortgage offers frequently and because AIP only lasts 3 months, by the time we find a flat that we want to make an offer on, the bank where we obtain the AIP may not be the one with the best deal. Therefore he has said that we should only obtain AIP when we are ready to make an offer.

This makes it a bit more difficult for us to know exactly how much we could afford as the difference between 4x and 5x our joint income is quite a lot. We would like to confirm the amount we can borrow to make sure that we are looking at the correct price range but we also do not want to waste a credit footprint.

(On this note, we would appreciate information on banks or mortgage lenders that do not employ a "computer says no" policy.)

Thanks in advance for any advice!

Fire_Fox

AFAIK mortgage in principle does not leave a footprint on your credit file. Although an MIP only lasts a few months most estate agents and vendors will consider it evidence of you being a serious buyer with funds in place after that.

picklepick

Edited: I was wrong, apologies.

martinsurrey

I have never had an AIP when offering, for the very reason you say, who knows what the mortgage market will be like in 2 months, and more importantly, the price of the place I get (may be one of several) will determine which mortgage company I use.

I have found that if you have a good deposit (25%+), a bank statement has always enough to convince an EA that you’re not mucking around.

martinsurrey

picklepick wrote: »

A mortgage offer in principle makes no note on your credit file, it's only when you apply in full after your offer is accepted.

WRONG and dangerous advice!

Only very few lenders (halifax) do a soft search at AIP stage, most to a proper search.

so getting 3AIPs will in most cases hammer your chances (many searches in a short period)

picklepick

martinsurrey wrote: »

WRONG and dangerous advice!

Only very few lenders (halifax) do a soft search at AIP stage, most to a proper search.

so getting 3AIPs will in most cases hammer your chances (many searches in a short period)

Apologies. I was misinformed. Has this changed recently?

sirona

martinsurrey wrote: »

I have never had an AIP when offering, for the very reason you say, who knows what the mortgage market will be like in 2 months, and more importantly, the price of the place I get (may be one of several) will determine which mortgage company I use.

I have found that if you have a good deposit (25%+), a bank statement has always enough to convince an EA that you’re not mucking around.

We have a large deposit (c.40%) but, like you said, the price of the place we get will determine the mortgage lender. We're just not sure how much the lenders would lend us. Technically, we should get the maximum, as every broker is eager to tell us, but we have no idea if this is true. (We're checking our credit files: no bad history, but I'm non-EU so not on electoral roll although I've added a notice of correction to explain this and offer proof of residences).

Ideally, we would like to get 5x our joint income as that would allow us to buy the types of properties we really want. I understand that Accord lends up to 5x and they lend to non-EUs, and would appreciate advice on whether we should go ahead with the AIP to be sure.