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Whether you’re a first-time buyer, moving, or looking to remortgage, an agreement in principle is one of the first stages in the mortgage process. This guide explains everything you need to know about securing a NatWest agreement in principle.
What is a mortgage in principle? (MIP)
A mortgage in principle is a pre-approval for a mortgage. If you’re about to start viewing properties with a view to buy, it’s a good idea to secure one at the earliest opportunity. A mortgage in principle will give you an indication of what you can borrow, and you will be issued a certificate by the mortgage provider confirming how much you may be able to borrow. They involve a credit check and can be arranged either via a broker, directly through the lender, or you may be able to arrange it yourself.
Advantages of an agreement in principle
There are lots of benefits to securing an AIP if you’re about to view properties and especially before you offer. Here are a few of the benefits.
Clear Budgeting: An AIP gives you a clear indication of how much you can borrow, helping you set a realistic budget for your property search.
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Increased Credibility: Having an AIP shows sellers and estate agents that you are a serious buyer, potentially giving you an advantage in competitive markets.
Faster Process: With an AIP in place, the mortgage application process can be quicker once you find a property, as some of the initial checks have already been completed.
Identification of Issues: The process of obtaining an AIP involves a credit check, which can highlight any potential issues early on, giving you time to address them before applying for a full mortgage.
Stronger Negotiation Position: Sellers may be more willing to negotiate with buyers who have an AIP, as it indicates financial preparedness and reliability.
Documents required for a NatWest DIP
The documents required for a NatWest Agreement in Principle (AIP) will vary depending on the application type and your employment status. Generally, you will need:
Proof of ID Acceptable forms of identification include a valid passport or driver’s licence, which help verify your identity.
Proof of Address Documents such as a recent bank statement or utility bill are required to confirm your current residential address.
Proof of Income
Employed: You will need to provide payslips for the last 3 months to demonstrate your income stability and regularity.
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Self-Employed Sole Traders: The bank will require SA302 tax calculations for the last 2 years to assess your earnings and financial health.
Company Directors: You must provide company accounts for the last 2 years to verify your income and business performance.
Agreement in principle for first time buyer
If you’re a first-time buyer, it’s important to secure a first-time buyer agreement in principle at the earliest opportunity. There are many things to consider when you’re buying for the first time, and knowing your budget and having some reassurance when offering on properties will give you peace of mind and help your negotiating position. Some estate agents or sellers may insist on you having one before accepting an offer.
Agreement in principle for home mover
If you’re moving home, it’s just as important to get a home mover mortgage in principle. It’s essential to get your home valued so you know the equity in the property and understand your borrowing capacity, giving you an indication of the maximum you can offer. Just like with a first-time buyer agreement in principle, it will help your negotiating position with sellers and estate agents.
Agreement in principle for remortgage
If you’re remortgaging, it’s also important to get an Agreement in Principle (AIP). You can apply for a remortgage typically 6 months in advance of your current deal ending. Running an AIP early may allow you to identify any issues early, and if you apply for the full application early, you can secure a rate in case rates go up.
How long is a NatWest aip valid for?
A NatWest mortgage in principle is valid for 3 months. They can be easily extended or reapplied for if you do not use them at this time. Once you have had an offer accepted on a property the validity period is extended by a further 6 months.
What is the Process of securing a decision in principle?
Book an Appointment: Schedule an appointment with a NatWest mortgage advisor or broker to discuss your AIP application.
Gather Documents: Collect all necessary documents, including:
– Proof of ID (passport or driver’s licence)
– Proof of address (bank statement or utility bill)
– Proof of income (payslips, SA302s, or company accounts, depending on your employment status)
Check Your Credit Report: Review your credit report to ensure there are no issues or errors that could affect your application.
Run Affordability Check: NatWest will conduct an affordability check to determine how much you can borrow based on your income and expenses.
Conduct Credit Check: NatWest will perform a soft credit check to assess your creditworthiness without impacting your credit score.
Receive AIP Certificate: If the checks are successful, you will be issued an Agreement in Principle certificate, indicating the amount you may be able to borrow.
Search for Properties: With your AIP in hand, start searching for properties within your budget, knowing you have a better negotiating position with sellers and estate agents.
Does a NatWest Agreement in principle do a soft credit check?
NatWest agreement in principle usually involves a soft credit check which does not leave a hard footprint on your credit file. It’s not unreasonable for you to carry out a few credit checks when searching for a property, for example if your aip expires or if another lender offers a better deal when you come to applying for the full mortgage application.
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Can I be declined a mortgage once I have an AIP?
While an AIP is a good indication of the amount you can borrow, it does not guarantee mortgage approval. A hard credit check will be conducted on the full application and will be fully underwritten once you have an offer accepted on a property
If you secure an AIP yourself rather than through a broker, there is also a higher chance of misinterpreting criteria, which can lead to declines on the full application.
What to do if am declined a mortgage in principle
If your AIP is declined, take the following steps:
First, find out the reason for the decline. Speak with a mortgage broker to get professional advice and guidance. Check your credit report to identify any issues that may have affected your application. Explore other lender options, as different lenders have varying criteria. Consider increasing your deposit or reducing the borrowing amount to improve your chances of approval.
How can a broker help with an AIP
A broker can help with an AIP by thoroughly checking the criteria to ensure a higher likelihood of success on the full application. They assist with all the paperwork and the overall process, making it more straightforward for you. Additionally, they can help you find the best deal on the market by comparing various lenders and mortgage products.
FAQ’s
- Does an AIP do a soft or hard credit check? The NatWest decision in principle involves a soft credit check. The full application involves a hard search.
How likely are you likely to be accepted for a mortgage once you have an Agreement in principle? If you have declared the correct information and worked with an advisor to ensure you meet the lenders criteria, most successful aips will result in a successful application. Those where information is omitted or criteria not checked correctly may have issues when fully applying.
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For more information on mortgages for contractors, please contact a member of the Strive team, by emailing info@strivemortgages.co.uk or call us on 01273 002697.
