What Is An Agreeement In Principle When Getting A Mortgage?
An agreement in principle is a useful bargaining tool for negotiating the purchase price on a property you wish to buy. It is also essential for bad credit applicants to know you'll probably be approved for the mortgage you need and how much you can borrow.
It's important to clarify that there is no such thing as 'guaranteed approval' - it simply doesn't exist!
Every lender will have a different set of eligibility policies. So the only sure-fire way to have confidence that your bad credit mortgage will be successful is to work with an experienced broker who can negotiate the terms on your behalf.
Here we'll explain how the mortgage approval process works - and how to get an agreement in principle if you have a bad credit history! For more help with your application, get in touch at 0330 304 3040, or drop us a message at [email protected].
Am I Likely to Get a Mortgage Agreement in Principle with Bad Credit?
It depends on a lot of factors! Lenders will consider:
- When your bad credit issues occurred - the longer ago, the better.
- Whether you have since repaid your debts.
- Why your adverse credit issues occurred.
- How serious the problems were - with repossession or bankruptcy the more severe.
- What deposit you can offer against the mortgage.
- How much you earn, and whether you can comfortably afford the mortgage alongside any other debt repayments.
The best approach is to ensure you only apply to a lender through a broker who can recommend mortgage providers who are likely to offer you a mortgage.
Applying at random is never wise since you are likely to rack up multiple hard credit checks, making it even more challenging to find a suitable bad credit mortgage.
Lenders will consider a mortgage agreement in principle application depending on what deposit you can offer and whether your income represents affordability.
How Can I Get a Mortgage Pre-Approval with an Adverse Credit History?
There are a few things you can do to increase your chances of a mortgage approval:
- A larger deposit will mitigate the risk factor. Aim for 20% to 30% if you want the most competitive rates on a bad credit mortgage.
- Seek support from family members, if possible, with gifted deposits or contributions to your deposit from close relatives usually considered acceptable.
- Look into guarantor mortgages, with a guarantee from a friend or family member who will vouch for you - but must cover the costs if you fall behind.
- Resolve any financial problems. If you can pay back short-term lending, work on repairing your credit rating, or wait until serious issues have expired from your credit file, you're far more likely to be approved.
- Work with an independent bad credit broker. The Revolution Finance Brokers team negotiates mortgages of all sizes for applicants with a vast range of bad credit issues, so there is usually a solution available.
How Difficult is it to Get an Agreement in Principle as a Bad Credit Applicant?
Again, it depends very much on what sort of credit issues you have had and how long ago.
The most serious issues such as bankruptcy will mean you can't apply for a mortgage at all until that bankruptcy has been discharged. Lenders will need to see that your finances are now firmly under control and no further problems have occurred to consider the application.
As a rough indication, the below table shows how likely you are to be approved for mortgage borrowing, depending on what credit issues are on your file and when they happened.
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Credit issue
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Within the last year
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One to two years ago
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Two to three years ago
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Three to four years ago
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Four or more years ago
|
|
Missed payments
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Yes
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Yes
|
Yes
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Yes
|
Yes
|
|
Mortgage arrears
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Probably not
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Possible, with a reasonable deposit
|
Yes
|
Yes
|
Yes
|
|
CCJs
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Possible, with a reasonable deposit
|
Possible, with a reasonable deposit
|
Yes
|
Yes
|
Yes
|
|
Defaults
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Possible, with a reasonable deposit
|
Possible, with a reasonable deposit
|
Possible, with a reasonable deposit
|
Yes
|
Yes
|
|
DMP
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No
|
Yes
|
Yes
|
Yes
|
Yes
|
|
IVA
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Possible, with a reasonable deposit
|
Possible
|
Possible
|
Yes
|
Yes
|
|
Bankruptcy
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Probably not
|
Possible
|
Possible
|
Possible
|
Possible
|
|
Repossession
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Probably not
|
Possible
|
Possible
|
Yes
|
Yes
|
Expert Support with Bad Credit Mortgage Pre-Approval Applications
If you need a mortgage agreement in principle with bad credit, it is vital to consult a whole-of-market broker who can assess which lenders will be able to accept your application.
Give us a call on 0330 304 3040, or email the team at [email protected] for an independent assessment.
