Questions about an agreement in principle

cheshirelabrador

It's likely, based on my income, that at least some mortgage lenders will be willing to offer more than what I ideally want to borrow based on current asking prices.

So I could apply for an agreement in principle for a higher amount than I plan to borrow and then possibly that could cover me if I decide I will need to pay a bit more for the type of house I want.

However, if I show I can afford a higher value to an estate agent, would that be a good or bad thing? 

K_S

@cheshirelabrador Some lenders (eg: Halifax) will issue AIP/DIPs that show the maximum borrowing amount at the LTV you've input, even if you've only applied for half that.

Others will issue AIP/DIPs that show the exact amount you entered in the application.

Yet others (eg: Accord) will issue two copies, one which shows the exact amount you applied for and one which shows the maximum.

Just to be clear, the above is with reference to broker DIPs, I don't if it's the same for direct DIPs.

I guess there are pros and cons for letting EAs know that your maximum borrowing is significantly above the amount you need. A positive might be that it shows that the mortgage is comfortably affordable and more likely to result in an offer and so puts you as a more proceedable buyer. A negative might be that it shows that you can afford to up your offer on the property.

Alternatively if you aren't comfortable with letting the EA know your maximum borrowing, you can have your broker email the EA confirming that your finances are in order and that you are good for the offer. I do this quite often, especially for clients who are borrowing from specialist lenders, as from experience EAs can get a bit funny with clients who have DIPs from lenders like Kensington, Bluestone, smaller BSs etc.

user1977

I don't think it matters as much as some people seem to think. All it does is remove the potential argument of "I can't afford that much". But that only makes sense if you think buyers are willing to pay more than a property is worth, and/or are willing to put everything they can afford into their house purchase.

I mean, I could afford to pay £100 for a tin of beans, but I'm hardly likely to...

cheshirelabrador

user1977 said:

I don't think it matters as much as some people seem to think. All it does is remove the potential argument of "I can't afford that much". But that only makes sense if you think buyers are willing to pay more than a property is worth, and/or are willing to put everything they can afford into their house purchase.

I mean, I could afford to pay £100 for a tin of beans, but I'm hardly likely to...

My understanding is one would show:
1. I'm seriously looking, so requesting viewings aren't a waste of the estate agent's time.
2. There aren't red flags that would prevent me from getting a mortgage for the amount I'm seeking e.g. income too low, or a red flag on a credit report.

canaldumidi

user1977 said:

I mean, I could afford to pay £100 for a tin of beans, but I'm hardly likely to...

Yeah but the Sainsburys check-out boy doesn't care what you pay and isn't going to try to increase the price of the beans, whereas an estate agent......

user1977

canaldumidi said:

user1977 said:

I mean, I could afford to pay £100 for a tin of beans, but I'm hardly likely to...

Yeah but the Sainsburys check-out boy doesn't care what you pay and isn't going to try to increase the price of the beans

But let's say they did - you would just say no, not feel obliged to turn out your pockets to prove you only possessed 50p.