Mortgage agreement in principle? Confused.

[Coconutfeet]

We have our place on the market and are now looking around for somewhere to buy. Last time I bought a place (a long time ago) I'm sure I had a proper agreement in principle from a lender before I found the flat. This time round, I've been in touch with a mortgage broker who has taken our financial details and said we can probably borrow X amount and that the next step is to find a property then they will sort it all out. Is this the normal way round?

The larger estate agents have said that they will want details of our finances before anyone will take an offer seriously. I am anxious to get an agreement in place in advance so that, when we do find the property we like, we can move quickly. We are looking in London and decent places are still moving reasonably quickly, so we don't want to get left behind.

Although I'm sure we will be able to get a mortgage, it might be a bit fiddly as dp is still in his probationary period so I know some lenders won't look at us, which limits our options somewhat.

Can anyone advise which way round they have done it?

Push for an AIP. Some agents will ask for it, if nothing else it will make you feel much more confident about progressing with making an offer if you know where you stand finance-wise. I also think it's a good idea to have a strong sense of exactly which product you're going to go for - we switched lenders about a week after making our offer, and here we are three weeks later with our mortgage application only just submitted and the vendors getting slightly itchy about the fact we are yet to do a valuation. Keeps everyone so much happier (and your stress levels down) if you are able to move asap once your offer has been accepted...

I've been in touch with a mortgage broker who has taken our financial details and said we can probably borrow X amount

I think this pretty much is^ a mortgage agreement in principle. You just need them to put it in writing on some sort of official form.

Do you think so Minciepie? We haven't provided any official paperwork and they haven't done any credit checks or anything as it was all done on the phone. Surely without that, it's pretty meaningless as I could be making it all up as far as they know.

Hmm, I am less sure now!

However as I recall they don't usually need paperwork for agreement in principle, that only comes when you apply for the actual final mortgage iyswim. The AIP is done on the basis of what you say being true.

Yes you could be making it all up but why would you, because even if you could get an inflated AIP that way, you'd never be able to get the actual mortgage once you do provide the paperwork. You'd have proceeded with an offer you couldn't go through with in the end. Also the lender isn't bound till they see the paperwork so they can pull out at any time even if they've given you an AIP.

For our AIP we had to answer a few questions - more detail than 'how much do you earn?' but not providing any official paperwork. We were asked whether we'd ever missed any credit/mortgage payments, about any c/c/loans/existing mortgage debt, etc. I think the AIP assumes you're being honest and as long as you are is a good indication of your ability to actually secure a mortgage.

Thanks London Lottie and Minciepie. I'll go back to the broker and have another chat.

Hi

WE recently bought in Central London, where there is still high demand. Agent wanted to see our financial details. Getting the AIP document was easy but can be pointless as that does not guarantee a full mortgage offer. 'Soft' credit scoring was used for our AIP. We got our AIP with no problems but as DH is self-employed, 2 banks refused to give us a full offer. Got one eventually. Vendor would not take the property off the market until full offer was in place. Both agent and vendor were very aggressive in getting us to move the transaction and mortgage forward. So, make sure you are happy with your broker and find out what paperwork the bank wants to see. The banks had very tough criteria and so try to find out whether your DPs probation period would hinder any full offer.

Hope it all works out.

I got a mortgage through my bank and they did the full checks (more straightforward because my bank) and got it underwritten, which meant that the valuation was turned around within a week. My existing building society, which I did want to stay with as it was a small local one, wouldn't do this and would only get it underwritten when I'd found a house, so they lost my custom. It is good being able to just get on with the valuation when you've found somewhere.

Sorry that should say got it underwritten before I'd found a property!

Thanks sh77 and Amaris. I spoke to our own estate agent yesterday about this and, like you sh77, he said that they wouldn't take a property off the market until the full offer was in. I think we need to get some paperwork in place now so that we can move quickly when the time comes. Thanks again!

Just to add my tuppence worth- we have just arranged a mortgage through a broker, who pretty much did what yours has and costed out a few products for us based on what we told him - he advised us not to get an AIP until we had found a place we wanted to buy, as he said that getting several AIPs and then not going ahead would damage our credit ratings. The local agents know him so were happy to take his assurances about us when making an offer, and he was able to get us a full mortgage offer within about 10 days of us having the offer accepted on the house we're buying.