Mortgage agreement in principle - amount to be reduced later?

amycs

We are currently looking to move and of course, the houses I like are at the absolute top of our budget.

Basically, I was wondering whether anyone has received their agreement in principle to later have the mortgage amount offered reduced later on in the process? I don't want to get so far down the line to be disappointed.

Thanks for reading!

marksoton

Yes this happens.

If you're right at the top of your budget it'll probably be worth engaging a broker.

mazy_m

Yes it can happen. This happened to us (although a bit different in circumstance) after a mortgage offer actually right before exchange when the purchase price dropped by £2,000 they did another mortgage application and decided they could no longer give us 90% LTV and we would have to give a 15% deposit with 85% LTV. That was a tough day but luckily we had some money to pay off our credit cards so used that for the deposit instead and actually our rate went down by quite a bit so it's worked in our favour in the end.


One piece of advice I'd give is just be really careful with you finances and they won't have any reason to reduce it. Ours was due to a late payment I believe they said it was due to the way a credit account was handled.

amycs

Thanks both. We have quite a large deposit as have been homeowners for 10 years, and I'd say our credit score is pretty good however I think that nowadays they look into your spending habits with a fine tooth comb and I am wondering if that will reduce it (not that we are big spenders by any means).

I am currently a stay at home mum returning to work next year, so there's only one income coming in at the mo, supporting a family of four. Will see if I can find a local IFA.

G_M

it can happen because either

* the specific property is deemed to be of a lower value than the amount being borrowed (or lower than the risk the lender is prepared to take)

or

* your financial position changes

or

* more detailed investigation of your financial position reveals something not previously revealed.

That's why it's called a mortgage in principle. It is not a firm mortgage offer.

teffers

I had my offer dropped by £1300 from the DIP.

Lender said this was due to a reduction in my yearly bonus (this year) and my student loan (£3K remaining paid @ £60 p/m via PAYE).

I'd given my broker all that information before the DIP so no changes to my financial situation from DIP to offer. Not a massive amount so I was able to just increase my deposit - bloody annoying though.

cloo

Yes, they can change the offer between in principle and final - we had ours dropped by a few thousand because the lender did more detailed checks in between, I think, and uncovered some a few small reasons that they wanted to reduce it. Luckily it didn't affect our ability to buy but you might want to look at ways of mitigating the risk of the final offer falling short if you are right at your limit.