How Reliable Is a Mortgage in Principle?

Understand how a mortgage in principle actually works and how reliable they are in the overall mortgage application process in reality.

Updated: November 22, 2023
Matt Crabtree

Written By

Matt Crabtree

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Whenever you're looking to secure a mortgage agreement with a lender, a pretty significant part of the overall process step revolves around obtaining a mortgage in principle (commonly referred to as an agreement in principle).

Still, given that it's quite a long-winded process, it's worth taking a look into how reliable this preliminary mortgage promise actually is — not to mention if it has any kind of impact on your credit history.

Understanding the Mortgage in Principle

Put simply, a mortgage in principle is essentially just a statement that you're given from a mortgage lender that indicates — after they've done an initial check of your financial circumstances — that they'd, in principle, be willing to lend you a certain amount of money for your mortgage.

This might sound slightly convoluted, but the main takeaway here is that it's an indication that your lender is probably going to approve your mortgage application based on all of the information that you've provided them with.

Just keep in mind that while these are fairly reliable and it is likely you'll be okay from this point forward, this kind of preliminary agreement isn't actually legally binding nor does it guarantee you a mortgage offer (it's just something you can use with your estate agent).

The Application Process and Credit Checks

Moving forward, when you decide you actually want to apply for a mortgage in principle, you shouldn't really run into any issues because you can usually just do so online or even through a bank or building society if you'd prefer to handle it in person.

Bring some documents about things such as your income, expenses, and other kinds of financial details that'll help streamline the process.

From here, whichever lender you've gone to will conduct what's known as a soft credit check, which basically just gives them a small snapshot of your overall credit history. You might ask yourself, “Does a mortgage in principle affect my credit score, though?” But don't worry — there isn't any kind of mark on your credit rating from doing this.

The Soft Credit Check and Its Role

So, this initial soft credit check we've just mentioned is actually pretty advantageous for both of the parties involved, letting you take an eligibility assessment without any sort of stain on your credit file and the lender gauge whether you're realistically going to be a serious buyer with a genuine chance of obtaining a mortgage.

Having said this, remember that mortgages in principle are positive steps but no actual guarantee of a mortgage offer, meaning that the lender is still going to have to conduct a more thorough check of your financial situation at some point by performing a hard search.

This only happens when you submit a full mortgage application, but it's worth noting that this kind of search will leave an impact on your credit rating.

Transitioning From Mortgage in Principle to Mortgage Offer

Finally, once you've finally obtained your mortgage in principle from the lender and have found a property that you're planning on purchasing, you're going to need to submit a full mortgage application.

Generally speaking, this just means providing a little bit more detailed information than you did during your soft search — information about things like your financial circumstances, employment history, and even the property itself, for instance.

We've touched on this briefly already, but just to reiterate, the lender will end up conducting a hard search at this point, and unlike your soft search, this one is going to leave a mark on your credit file — something that you'd generally want to avoid given how credit reference agencies perceive this kind of behaviour.

Naturally, this search is actually a lot more comprehensive than the initial soft credit check you should've already taken, so it's obviously a pretty crucial part of the entire mortgage application process that's worth paying close attention to.

Once your lender has taken a look at all the information that you've provided, they should then have everything they need to make a final decision on whether or not they should provide you with a mortgage offer.

Related Guides:

How Reliable Is a Mortgage in Principle: FAQs

How Does a Mortgage in Principle Impact My Credit History?

Can I Rely on a Mortgage in Principle When Making an Offer on a Property?

What Steps Can I Take to Improve My Credit History for a Better Mortgage Deal?

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