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If you are a first-time buyer, one of the dilemmas you would typically face initially is whether to apply for a mortgage first or find a house first. The best approach would be to apply for a mortgage first and then look for property and here’s why.
Can you afford a mortgage?
Before you buy a property, you need to work out how much money you’ll need to purchase your new home. As you may have saved up some money for the initial deposit of the house, the rest of the purchase price will need to be covered by a mortgage and in order for that to take place, you need to know the maximum amount you can borrow from a lender.
Most importantly, you’ll need to be sure that you meet the lenders’ lending criteria as well since their requirements have become stringent for someone who has not been living in the UK for more than 5 years or is currently in a complex financial position, especially if you self-employed or starting up a company.
Provided the mortgage is affordable as per the lender’s affordability calculator and you match the lender’s lending criteria, you can request a mortgage in principle.
Why do you need a mortgage in principle?
A mortgage in principle or MIP is a document generated or drafted by the lender themselves which the mortgage broker can obtain on your behalf. With a mortgage in principle, you have a competitive edge against your rival buyers to secure your dream property by giving confidence to the seller that the lender will lend the amount you need to make the purchase.
An MIP indicates the maximum loan amount you can borrow from a lender after considering some of your information such as your employment income and monthly credit commitments such as loans, hire purchases, etc. There will also be initial checks on the information provided in order to make sure you meet the lender’s eligibility criteria.
Also, be aware that when generating a MIP, the lender will conduct a credit check through their credit agency to see if you have an acceptable credit report and this could either be a soft or hard credit check.
However, please note that the mortgage in principle will not guarantee a mortgage from the lender and is it is only an indication that you could borrow the said amount based on your current circumstance.
How do you get a mortgage in principle?
Before getting a mortgage in principle you will need to look for a rate that you think suits your monthly budget the best. Most people look for the cheapest rate or product there is, but you need to make sure you fit the lender’s lending criteria in the first place. Provided you do, you can either contact your mortgage broker or the lender in order to get your decision in principle.
Here at WIS we review your credit information and personal circumstances before it gets to the lender to give your application the best chance of being approved. If you’d like more information on acquiring a mortgage in principle please contact us at firstname.lastname@example.org
Or call us on 020 3011 1986.
As a mortgage is secured against your home/property it may be repossessed if you do not keep up with the mortgage repayments.