Should I need an 'in principle' mortgage offer?

ajwid01

Hi,

My wife and I found a second-home we were interested in purchasing back in October/November 2012. The vendors had been trying to sell for around 18 months.

My wife negotiated a price directly with the vendor which they were happy to accept; but this was on the understanding that we likely would not be able to proceed until March 2013; as our deposit would not be ready until that time-frame.

We were then invited to see the estate agent's mortgage adviser, asking us to bring with us salary slips and ID; even though we had informed them that we had already approached our mortgage lender of choice and were advised that funding would not be an issue.

[ Our planned mortgage lender offered us an AIP, but I declined on the basis of not wanting a stamp on my credit file at that time; but they did give us a letter based on all the other data we had given them (earnings, CC debt, other debt) that suggested we would have no problem obtaining the required funding. ]

The estate agent's mortgage adviser had no idea why we had turned up for our (inconvenient for us) evening appointment; but suggested that this was due to us stating we did not want to proceed until March 2013 - as in most cases, such forward-offers never proceeded to an eventual sale.

Having not checked any of the financial details and ID that we brought with us - he suggested that we would have no problems obtaining a mortgage off the (honest) information that we provided him.

On the basis that we would not be ready to proceed until March 2013, we agreed it was fair for our offer to remain "on the table as acceptable", but for the property to remain "on the market". We're reasonable people and wouldn't want the vendors to lose out on any prospective quicker sale in the interim; given that they've been trying to sell for quite some time.

Now in the present...

We have our deposit ready. We telephoned the vendor directly yesterday to check that our offer was still acceptable and to get an idea of how soon they might be able to move if we proceeded. (They are intending to down-size to a vacant retirement property, so are "good to go" any time.)

We had the intention of making a formal mortgage application in the next week-or-so, but obviously wanted to make sure that our offer was accepted and the property moved to "Sold subject to contract" (SSTC) before setting everything in motion.

We are now informed by the vendor's agent that they will not accept the offer and place the property as SSTC unless we give them a "mortgage certificate" or "agreement in principle" (AIP) from our prospective lender.

Will it likely affect us in any way detrimentally if we straight away apply for an 'AIP' from our chosen lender; given that we are potentially proceeding straight to a full application immediately thereafter?

The first home I bought (8 years ago), which I am retaining - I never had to go through this rigmarole of obtaining an AIP. My offer was accepted, property taken off market and sold STC; at the same time as I put in my mortgage application.

This 2-step affair of getting an AIP and THEN putting in a full application, essentially back-to-back has me confused.

I could have understood this AIP if they wanted this back in November, and we were wanting to wait to exchange contracts/complete for a couple of months or so; but we're talking about completing a.s.a.p. now.

In fact, the agent's mortgage advisr suggested back in October/November that they would likely take it off market if we were willing to go straight to contract stage.

Any advice anyone?

Lokolo

An AIP shows you are closer than "guessing" what you can afford. It won't harm you in anyway and are usually valid for a number of months. You should have done it back then, rather than now. You can get one and carry on looking.

Why not just get the AIP today and just give it to them?

kingstreet

An agreement in principle is normally the first stage of a full application to most lenders. Nationwide and Halifax, to name but two, work this way, so it should be straightforward to start, complete the AIP section, print off the decision certificate and provide it to the agent. Then go back and continue to build the application from the data already input to complete the submission and pay the necessary fees.

ajwid01

Super.

Many thanks.

I was just very edgy when someone suggested it'll put a footprint on my credit file, and then they will do another one when it goes to an underwriter.

Back in November, I hadn't realised that having multiple "in-use" credits cards was seen as a credit risk (I've maintained multiple ones for different expenses since the 80s!).

I have been in the process of cleaning up my credit file "in advance" of a potential mortgage application in early 2013.

I've done "next to nothing" really, apart from pay off a couple and stop using them - but this seems to have bumped my credit rating score by about 200+ points with Experian, for virtually no effort. All seems a bit daft really; but it's something I didn't realise the significance of. My (however arbitrary it might be) rating currently suggests it's about 930.

There are another couple I can zero balance out too. Should I wait until this is reflected on the credit file before hitting it with a AIP "hit", or given that they're not significant amounts and I will have paid them off in the next month - will it really matter?

Based on the lender's "how much can you borrow" type calculator, I'm about £50K over what I need in terms of what they suggest they will theoretically lend, and this is similar to what they said when I went to see them and 'fessed up all my financial spiderweb back in 2012.

I just wanted the credit rating to be "at it's best" for when I made anything formal; that's all - and seeing anything that hinted at being a 'warning' gave me the jitters.

Apparently it doesn't take into account anyone's actual earnings (which currently place me in the top 10% of earners statistically apparently...); so that's one consideration that seems fundamentally absent in it's rating algorithm. Just makes me wonder what real use it is in that respect...

Any other advice or considerations I ought to have, before I proceed?

kingstreet

Not really.

In my experience, most lenders don't fuss too much over unused credit facilities. They care more about the credit you have, that it's well-managed and not going to affect affordability too much.

The only lender which seems to have a real fear is YBS/CBS/Accord Group which routinely reduces lending because of what you could have on credit.

If you have an agreement in principle now, provided you apply fully within a month and apply for the same mortgage/loan to value or less, no further credit search is normally done.

ajwid01

Ah, that sounds good.

Thank you very much everyone for all your enlightenment.

:-)