Video: How To Show You're A Serious Buyer - Estate Agents in Derby

In this week’s video, Ben and Joe talk about why, when and how to get your agreement in principle sorted to show you’re a serious buyer...

*** To arrange a chat with one of our own friendly, expert mortgage advisers complete the short form here – hannells.co.uk/speak-to-an-adviser ***

Ben: Hi it’s Ben from Hannells and I’m here with Joe, one of our expert, in-house mortgage advisers and in this video we’re here to talk about an important part of the buying process which is the agreement in principle – also known as the mortgage in principle or mortgage promise, same thing many different names.

Joe: So, from a mortgage adviser point of view I understand why we need a decision in principle but from an estate agency point of view why do you need it?

Ben: Yeah it’s a good question. It’s important for us as estate agents particularly at the point of a buyer making an offer because if you make an offer and you’ve got that documentation – your agreement in principal Mortgage in principle, whatever you call it – it shows that you’re serious as a buyer.

It shows that you’ve done you due diligence as much as you can to show that you can afford the property that you’re actually making an offer on. And if you’re making an offer on a property versus somebody else making an offer on the property and they don’t have that documentation it puts you in a more favourable light not just to the vendor but to the estate agency as well because until you’ve got that piece of information, theoretically you’ve actually got no idea as to whether you could actually afford the property that you’re making an offer on.

So we’ve talked about there it’s the same piece of information with several different names but there is actually the mortgage offer as well which is different to an agreement in principal, mortgage promise, so from an advisor’s perspective what’s the difference between that initial agreement in principle and the actual mortgage offer?

Joe: So yeah an agreement in principle, a mortgage in principle, decision in principle, something in “principle” is a certificate that says you can borrow a certain amount of money to help you look for properties. Now most mortgage lenders will do a soft credit search so it won’t impact your credit rating when they search to do that initial thing.

Now the mortgage “offer” is something that happens at the end of the mortgage process so you make application say “okay we want to buy this house for this much money this is my deposit”. The mortgage company will underwrite you as an applicant. They’ll value the property to make sure they’re happy with it. When they’re happy with you and they’re happy with the property you’re buying they’ll issue the mortgage offer which is the document that says “yes, we are happy to give them this money to buy this house”.

Ben: Yeah hopefully that clears it up a little bit because it is confusing isn’t there so many terms for the same things when it comes to buying property.

Joe: Well you’re making an offer on a house you’re getting a mortgage offer. It gets confusing.

Ben: So going back to that agreement in principle, which is the earlier part of the process like we’ve talked about, when you’re making an offer does there tend to be an expiry date on those? So let’s say for example that I make an offer on a property. I’ve got my agreement in principle but I don’t get the property. I don’t then find another one that I like for another six weeks or so, can I still use that same agreement in principle providing that it’s obviously the right amount included with it?

Joe: Yeah you can, usually they last for three months. Now not every mortgage lender will be able to lend to every type of property. So trying to find the right property first before you get a decision in principle, sometimes mortgage advisers will do that – they’ll say wait until you find the right house or property or flat or whatever you’re looking to buy, before they issue a mortgage in principle.

Now some people just get a mortgage in principal to say yeah here you go, go find the properties. There’s no wrong or right way of doing it.

Ben: Ok, so if your advice there is to not get your agreement in principle until you find the property that you want to go for, which makes sense because of that expiry date Etc, so for me as a buyer how am I supposed to find out what sort of property I can actually afford if I’m not going to get my agreement in principle until I find the one that I’m looking for?

Joe: So what we’ll do is always have that initial meeting with a mortgage advisor with your payslips your bank statements your credit report. It’s always good to get a credit report so the advisor knows what they’re working with. At that point they’ll be able to know what sort of mortgage lender they can target for your specific needs and that’s when they can work out how much money you can borrow based on those mortgage companies.

Now, like I say they say there’s no wrong or right way of doing it, you could get a mortgage in principle straight away find the right house maybe six weeks later and then sit down and actually that mortgage in principle might not be the best one for you and at that point you can then look at who is is the best lender for you. That’s why it’s good having a soft credit search.

Like I say there’s no wrong or right way of doing it so it is down to the advisor and the client.

Ben: OK, so for somebody that’s already looking for a property or is thinking of buying a property and hasn’t got their mortgage or their finance sorted yet, what would you advise them as the steps to get going?

Joe: Ok, yes so step one for me is always sit down with a mortgage adviser and figure out how much money you can actually borrow taking into account your deposit your income your outgoings and your credit report that’s so important.

Ben: And just on that how often do you find that when people sit down with you what they thought they could afford is actually incorrect, whether they can afford more or they’re not able to afford as much as they thought?

Joe: Yeah quite quite common to be honest. A lot of people do some research online and think “right I’ve got a general idea” but sometimes not and it’s not a one one shirt fits all scenario you know, people earn different types of money as in people have commission and bonuses and things like that, that can all be taken into account. So actually they might be able to borrow a lot more than what they thought.

And each mortgage lender works out how much you can borrow slightly differently so that’s another thing to consider as well.

Ben: Yeah, so step one see an advisor to give you a general idea of what you can afford to go up to, step two?

Joe: Step two is then go away and find the right property. In fact find the property that you like and keep in touch with your mortgage adviser and say “yeah I found this property I want to go for it”. Now if you do want to go for that property I’d suggest getting a decision a principal at that point.

Ben: So I’ve been to see you, Joe, as my adviser you’ve given me an idea of what I can afford. I’ve found a property I’m really interested in and I want to make an offer. I’ve let you know I need an agreement in principle from you – how long does it take for you to get that to me?

Joe: Yes, so agreement in principle as long as I’ve seen all the documentation I need and I’ve seen your credit report and I’m happy with that, usually you can get that done within an hour.

Ben: So really quick then?

Joe: Yeah really quick.

Ben: OK, well hopefully that’s cleared quite a few things up because mortgages can be quite a complicated business so if you’re in the market for a property and you haven’t sorted your finances or your mortgage by all means get in touch with us here at Hannells and Joe here or one of our other expert in-house mortgage advisers we’ll be more than happy to help – whether it’s that initial consultation or arranging an agreement in principle for you, click the link (at the top of this page) and we’ll be more than happy to get that sorted for you. So as always Joe thanks for joining us, thank you, thanks for watching and see you on the next one!

So get in touch on any of our social media channels below or send an email to enquiries@hannells.co.uk and we’ll be happy to point you in the right direction.

To catch all of our latest content, make sure you subscribe to our social media channels below!