An agreement in principle, also known as a mortgage in principle or decision in principle, is where you pass a mortgage lenders credit score in order to get one step closer to obtaining a mortgage.
Once you have obtained your agreement in principle and have enquired about first time buyer mortgage advice in Newcastle, you are ready to go forth and make an offer on a property you wish to live in.
Having an agreement in principle to hand can be a big help for first time buyers in Newcastle, helping them to negotiate a lower asking price. This will show a seller that you are serious about buying a property and are ready to proceed.
We find that nowadays, customers are much more aware of what is good for their credit scores but importantly, what is bad for them too. One of the things we know more about these days is that people are more aware of how credit searches work and how it can impact their credit score.
Of course, anyone that applies for credit will find themselves having a credit search taken out on them, to make sure that they are creditworthy. This will apply to mortgages, personal loans, phone contracts, car finance, really anything that you can think of credit wise.
As an open & honest mortgage broker in Newcastle, we will not carry any credit checks of our own on you, though your mortgage advisor in Newcastle will ask for your permission on behalf of a mortgage lender, as they will be carrying one out on you.
Credit searches typically will be found in one of two different forms, being a hard search and a soft search.
A hard credit search gives a mortgage lender a much more detailed look at your credit file. Any company that is looking to have these taken out on you must ask for your permission before they do so, as although it won’t always, it can actually have an impact on your credit score.
The positive for any customer having a hard credit search taken out on them, is that this will give a mortgage lender the best overview of your financial circumstances. Nothing is guaranteed with mortgages, though if you pass these checks, you are in with a better chance of being successful.
Hard searches are much more likely to leave a credit footprint on your file, which is a record that a hard credit search has been taken out on you. If you are successful in these checks, it can have a boost to your credit score!
The downside though, is that even if you were successful, your footprint will not show this to anyone that looks at it, they’ll only see that it was done. For all they know, if you have taken out multiple, you could have failed previously or be applying multiple times! This in itself can affect mortgage success.
The reason for this happening, is that having multiple credit searches taken out on your name can often be interpreted as you applying for multiple credits at once, perhaps with you even failing and trying again, which not only harm your credit score, but doesn’t look good to a mortgage lender.
This isn’t to say that having a few taken out against you will be massively negative, it’s not a major worry for you, it’s just always best to make sure that you are cautious about what you are doing.
Quite the opposite to when a hard search is taken out on you, soft credit searches don’t go into as much depth, with them mostly being found with price comparison sites or as a means to verify your identity. We find that more and more mortgage lenders these days are using soft credit searches.
When you have a soft search taken out on you, the company that starts the search will not be able to see as much information as they would have by taking out a hard credit search on you. That being said, soft searches may also have less of an impact on your credit score as well.
Whilst less information is gained by doing one of these, if it all ends with you being given a mortgage agreement in principle, it really doesn’t matter which one is used on you.
Additionally, whereas financial institutions can see hard searches, soft searches are hidden, with them only being visible to you. That means in one circumstance, you may be unsuccessful with your application, but it won’t necessarily look too bad to another company.
An agreement in principle will not guarantee that you are to be accepted for a mortgage application. The mortgage lender will need to see take a look at all of your documents, before an underwriter makes a decision on your mortgage future.
Agreements in principle tend to come with a lot of small print and we often find that customers ring us having being declined at full application stage.
You will need to provide ID to prove your identity, payslips to show how much you earn and bank statements to prove you are good at handling your finances, before a mortgage lender will offer your case for a mortgage in Newcastle.
The required documents will be a little different for mortgage applicants who are looking to obtain a self employed mortgage in Newcastle.
You do have the ability to make an offer without an agreement in principle, though this is not something we would recommend.
Any estate agent worth their weight in gold will want to make sure that someone who wants to apply for a mortgage, especially when they are applying for a first time buyer mortgage in Newcastle, has the means to go forward with the process.
In most cases, we are able to get you an agreement in principle within 24 hours of your free mortgage appointment with a mortgage advisor in Newcastle. This is something we look to do for everyone that gets in touch with us and needs to obtain one.
An agreement in principle will usually expire after 30-90 days. Don’t worry though, just because you have got an agreement in principle, you aren’t obligated to buy the first house you see!
We think it’s a great idea for you to look at getting an agreement in principle as early as you possibly can, to avoid the disappointment of finding a house and then finding yourself declined for a mortgage after you have already had your heart set on it.
If your agreement in principle expires it’s easy enough to have that refreshed when you’re at the point of wanting to make an offer.
Last edited 06/02/2023