Mortgage Turned Down After Agreement in Principle: What You Need to Know
Securing a mortgage is an exciting part of the home buying process. However, an agreement in principle does not guarantee that the lender will approve your mortgage application. In fact, it is not uncommon for a mortgage to be turned down after an agreement in principle has been granted. In this article, we will explore the reasons why this might happen and what you can do to increase your chances of approval.
What is an Agreement in Principle?
An agreement in principle (AIP) is a preliminary decision made by a lender that they are willing to lend you a certain amount of money for a mortgage. This decision is based on a basic assessment of your financial situation, including your income, expenses, and credit score. It is not a formal offer of a mortgage, but rather an indication of the amount that you might be able to borrow.
Why Might Your Mortgage be Turned Down After an Agreement in Principle?
There are several reasons why your mortgage could be turned down after an agreement in principle has been granted. These include:
1. Changes in your financial situation. If your circumstances change between the time that you receive your AIP and the time that you apply for a mortgage, your lender may reassess your financial situation and decide that they are no longer willing to lend to you.
2. Issues with the property. Your lender may have concerns about the property that you are buying, such as issues with the title or building regulations.
3. Issues with your credit history. If your credit score has decreased or you have missed payments on other debts, your lender may decide that you are too high-risk to lend to.
4. Issues with affordability. When you apply for a mortgage, your lender will look at your income and expenses to determine whether you can afford the mortgage repayments. If they believe that the mortgage is unaffordable, they may turn down your application.
What Can You Do if Your Mortgage is Turned Down After an Agreement in Principle?
If your mortgage is turned down after an agreement in principle has been granted, there are several things that you can do:
1. Speak to your lender. Find out why your mortgage was turned down and whether there is anything that you can do to increase your chances of approval.
2. Check your credit score. Make sure that there are no errors on your credit report and take steps to improve your credit score if necessary.
3. Consider applying to other lenders. Just because one lender has turned you down, it doesn`t mean that all lenders will. Shop around and see if there are other lenders who are willing to offer you a mortgage.
4. Reassess your budget. If your mortgage is unaffordable, take a look at your budget and see if there are any areas where you can cut back on expenses.
In conclusion, being turned down for a mortgage after an agreement in principle can be frustrating and disappointing, but it is not the end of the road. By understanding the reasons why your mortgage might be turned down and taking steps to address them, you can increase your chances of securing the mortgage that you need to buy your dream home.