When it comes to buying a property, getting an agreement in principle is an essential first step. It is a statement from a lender that they would be willing to lend you a particular amount of money based on your finances and credit score. Having an agreement in principle shows estate agents and sellers that you are a serious buyer, which could give you an advantage in the competitive property market.
But what exactly do you need to have in place to get an agreement in principle? Here are some key things to consider:
1. Know your credit score
Your credit score is one of the first things a lender will look at when deciding whether to lend you money and how much they`re willing to lend. Before applying for an agreement in principle, it’s a good idea to check your credit report for any errors or discrepancies. You can obtain a free credit report once a year from each of the national credit reporting companies: Equifax, Experian, and TransUnion.
2. Provide proof of income
Lenders want to make sure you`ll be able to repay the mortgage, so they`ll usually ask for proof of income. This could include payslips, tax returns, or bank statements. Be sure to provide accurate and up-to-date information so that the lender can make an informed decision.
3. Have a deposit saved
Most lenders require a deposit of at least 5% of the property’s value. However, the bigger the deposit you have, the more favorable your mortgage terms may be. Make sure you have enough saved to cover the deposit and any associated fees, like solicitor fees and survey costs.
4. Know how much you can afford
Before applying for an agreement in principle, it’s important to have a good understanding of how much you can realistically afford to borrow. Use a mortgage calculator to get an estimate of how much your monthly repayments would be based on different loan amounts and interest rates.
5. Be prepared to provide additional information
Depending on the lender and your individual circumstances, you may be asked to provide additional information or documentation. This could include details of any outstanding debt or credit commitments, or proof of residency if you’re not a UK citizen.
In conclusion, getting an agreement in principle is an important step in the home-buying process. By having a good understanding of your finances and being prepared to provide accurate information, you`ll be in a strong position to secure the best possible mortgage terms and ultimately buy the property of your dreams.