What is a mortgage in principle?
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A mortgage in principle (MIP) is a document providing an indication of how much you could borrow to buy a property. Also known as an agreement in principle, decision in principle, or a mortgage promise, it helps you focus your search on a home that’s affordable to you.
It can also be a necessary document in your home viewing journey, especially in Scotland where you won’t be able to view a property without one.
Is a mortgage in principle the same as a mortgage offer?
No it’s not. A mortgage agreement in principle is, as expected, in principle. This means that it’s what you could theoretically borrow, assuming you meet the lender’s criteria.
A mortgage offer is an official agreement of what they are willing to lend you, once they’ve carried out their checks and are happy that you are a suitable customer.
How reliable is a Mortgage in Principle?
It doesn’t guarantee that you’ll get approved for a mortgage, but it can give you a realistic idea of what you can afford to borrow. This can save you a lot of wasted effort and heartache when you’re looking for a home, as you can immediately rule out those you won’t be able to fund.
If you use a broker, like ourselves, we’ll be able to assess your circumstances and make sure you apply for a mortgage in principle that’s most likely to be successful when you go to the full application stage. So long as the information you provide is accurate and your circumstances don’t change in the meantime, a MIP should be your first step towards getting a full mortgage.
Applying for a mortgage in principle
You can apply with a broker like ourselves, or directly with a lender. The difference is that when you approach just one lender, you’ll need to meet their criteria exactly.
As a whole of market broker, we can look at your circumstances against the criteria of multiple lenders to see where you might have the most success.
It’s a good idea to prepare before you apply for a mortgage in principle, as you’ll need to provide:
Personal identification documents - A passport and proof of address - usually for the past 3 years
Details of your current financial circumstances - including all income and outgoings, as well as any debt
Almost all lenders (and Mojo) use a soft credit check - so it’s a good idea to understand your credit report before you apply. A soft credit search won’t leave a record on your file and if a lender is going to use a hard credit check, they’ll tell you first
Can I get a mortgage in principle online with Mojo Mortgages?
You can get a mortgage in principle with our help in just 15 minutes, using your phone or chosen device, completely free of charge.
We can submit any necessary documents directly to the lender through our portal on your behalf, saving you time and hassle.
Is the Mojo mortgage in principle the same as you’d get from a bank?
There's only one difference.
Both show how much you could afford to borrow and indicate that, based on current knowledge, you’d have no major credit or financial issues that would prevent you getting a mortgage.
Both can also be used to make an offer on your chosen property.
However, when you get a Mortgage in Principle from a lender, you're beginning the mortgage application process with them. Submission of documents to the lender and chasing any progress is your responsibility.
If you choose Mojo as your broker, we can ensure your paperwork is correct before we send it. We can also proceed to look at other lenders for you, if you’re unsuccessful, or don’t get the offer you’re looking for.
How long does a mortgage in principle last?
Usually for 90 days - although it can vary by lender, some only last for 30. If your circumstances change during that period of time, you’ll likely need to re-apply.
How much does it cost?
Usually you won’t need to pay for a mortgage agreement in principle. Fees and charges generally only apply after you’ve received an official mortgage offer.
When should I get a mortgage agreement in principle?
The vast majority of estate agents now tend to ask for a mortgage in principle before they will set up a property viewing - especially in Scotland, where this is essential. It’s, therefore, a good idea to have one ready before you begin your home search.
Does a mortgage in principle guarantee I'll get the mortgage I want?
No, it doesn’t guarantee you’ll get any mortgage, let alone the one you want. It is a strong indicator of how much you could borrow, but not all lenders will offer the same size loan. They all have different criteria and attitudes to risk, so it’s perfectly possible that you’d be offered more from one lender than another.
This is where it can be helpful to apply through a whole market broker. We can look at the lenders we feel will be able to offer you closest to what you think you’ll need to buy a home.
If you don’t get the loan size you’re looking for from one lender, there is nothing stopping you trying again, so long as only a soft credit search has been carried out against you.
What might stop you from getting a mortgage agreement in principle?
If it’s apparent from early information that you wouldn’t qualify for a mortgage, a lender is unlikely to give you an agreement in principle. This means that those with certain circumstances may struggle to get one. For example:
A poor credit history
You have substantial outstanding debt - which may be described ad a high DTI (debt to income) ratio
You’re not on the electoral roll
Your income is not considered reliable enough, either due to being mostly benefit-related income, or if you’re on a less stable work contract, such as a zero hour contractor
Can your mortgage be declined after an Agreement in Principle?
Yes, it can. Although this doesn’t happen often, it’s usually when you’re either unaware of something on your credit report or unable to prove your income to the lender’s satisfaction.
There could also be issues if you do any of the following after you get your mortgage in principle, but before going to full application stage
You changed jobs
Your income goes down, or outgoings go up
You take out a additional credit
You miss payments on current credit commitments
Finally, it’s possible that your chosen property is unacceptable to the lender, perhaps if they don’t think what it’s worth you’re intending to pay for it.
Having a helping hand from knowledgeable and experienced mortgage experts can be invaluable in getting past these types of hiccups in your home ownership journey. For example, if Mojo is your broker, we’ll do everything we can to get you the full story about your rejection.
Does getting a mortgage in principle affect my credit score?
Usually not. Lenders and brokers typically use a soft credit search when completing a mortgage in principle application, which doesn't leave a mark on your file.
When you go through to the full application stage, most lenders carry out a full credit search, which will leave a mark on your credit record. This isn’t a negative mark, however, and will only impact you if you’re declined and want to apply again with another lender.
Can I make multiple mortgage in principle applications?
Yes, you can theoretically have as many as you like. If you’ve been approved, but feel that another lender might offer you more, there’s no harm in applying with them - so long as they only use soft credit checks.
If you’re concerned, ask whoever is completing the application for you. At Mojo Mortgages, we always use soft search credit checks at MIP stage.
Can you make an offer without a Mortgage in Principle?
Yes, it’s possible, although in some parts of the UK estate agents won’t allow you to view the property or make an offer on it without one.
It can also increase the gravitas of your offer. Many sellers will feel more confident if they know that your offer is a serious one if you’ve gone to the trouble of getting an MIP from a lender and should be able to provide the funds to buy their property.
Can I change the mortgage amount after receiving a mortgage in principle?
It depends on the lender and how much more or less you need to borrow. If you need a much bigger loan, however, the majority of lenders would want you to apply from scratch.
However, they are very quick to obtain, so even if you need to re-apply, it shouldn’t delay things too much, assuming you still qualify.
What happens after I get an agreement in principle?
You can begin looking for your perfect home. Once you’ve found one that you love and had an offer accepted, you can begin the formal mortgage application process.
This can either be directly with the lender, or if we’ve done your MIP for you, we can do that bit for you too. Having a broker, like ourselves, on your side, especially on your first mortgage, can be a great comfort.