Is an Agreement in Principle a good thing?

hieveryone

Hi all

Looking at buying a new house with partner. I have previously been refused for a relatively small loan and so went to speak to the bank the other day. Whilst there they gave me a letter of 'agreement in principle' for a mortgage for the amount we need - is this a good thing i.e I don't need to worry about being 'accepted' for a mortgage?

Issues on my credit file:

Lloyds TSB - marked as 3 payments late September 2008. Marked arrangement to pay October 2008 - January 2010 and settled February 2010.

Santander - marked as 6 payments late May - August 2008. Marked as defaulted in September 2008. (£548) Settled in November 2008.

Everything else is 'green' and up to date.


Would this mean I would be rejected?

Thanks in advance

kingstreet

What exactly did they do before they provided this letter?

Credit search? Full or soft? Which lender?

hieveryone

kingstreet wrote: »

What exactly did they do before they provided this letter?

Credit search? Full or soft? Which lender?

It was my own bank so I didn't have to 'provide' anything. She said it wouldn't appear fully on my account and it was what people do when they are 'shopping around' for a mortgage.

This was RBS - not who we would go with necessarily.

StuC75

An agreement in principal is just a guide for basic affordability - its only upon full application that the full internal credit score and file search would be undertaken by the mortgage company..

It only shows that based upon salary and basic income & expenditure checks that you could afford it in principal..

Defaults stay on file for 6 years from when registered so it 'may' affect,, but would depend upon lender & underwriters..


What were the amounts on the Lloyds & Santander...

kingstreet

In which case I would treat it as indicative only and not rely on it.

hieveryone

The Lloyds one doesn't show an amount, but it basically went overdrawn by a very small amount by accident whilst I was out of the country, and then because of charges added up and added up. Shows as Arrangement to Pay, not any amounts.

Santander says 'Default / Delinquent Balance - £548

hieveryone

Added:

I earn a decent salary (£42k), am in a permanent job and I am registered on the Electoral Roll. I have very little debt now, and any CC's I have get paid off monthly. Very small loan of £2000 from RBS which I could probably pay half of relatively soon if needed.

Miss_Marple_2

RBS don't credit check to give an AIP, so there are no guarantees.

I had an AIP from them which they would have turned down at full application when they credit checked me ( I also had a default and some late payments from 4 years ago)

I went with another lender, where I got a better fixed rate and their criteria stated that they would ignore 1 default over 3 years old. I used a broker, though - they know the lending criteria and who might accept you.

The age of the default is in your favour, so you might be OK.

hieveryone

Thankyou Miss Marple.

We would go with a broker for sure, I just went to my own bank just to get an idea/reassurance.

Feel a bit more reassured!