Agreement in Principle Self-Employed

What information do self-employed borrowers need to provide when applying for an Agreement in Principle?

This takes us back to the dangers of applying for an Agreement in Principle yourself. Technically, for an online Agreement, you don’t need to supply anything. This is why it’s risky, because you just key in the numbers and it will come up with a decision.
We wouldn’t do that. I can get you a credit check done based just on what you tell me, but I don’t really like to. We like to have the information in front of us, so we know we’re putting in the right details from the start. I like to have your tax calculations at least, or your accounts, depending on your situation.

How reliable is an Agreement in Principle?

If you put the right figures in, it is completely reliable. We get all the figures in front of us – so we know your profit figure or your salary, your outgoings and your situation. The Agreement in Principle can be relied upon pretty much 100%.

If you’ve done it yourself and you’ve put in the wrong figures, then obviously the result is wrong and can’t be relied upon at all. It’s as reliable as the information you put in.

How long is an Agreement in Principle valid for? What happens if I’m self-employed and my income changes?

Most are valid for 60 to 90 days, depending on the lender. If you’re self-employed, your income only really changes every year, because we’re looking at your annual income for the previous year, not your current income.

Let’s say your net profits were £50,000 for the last couple of years on average. But now you’ve got a new contract and you’re set to double that. That’s great. But we can’t use that until we get to the end of the year.

From a lender’s point of view, your income is not going to change month to month if you’re self-employed, although it could do if you’re employed. It’s not something you particularly need to worry about.

Will I need a credit check? Does an Agreement in Principle affect credit score?

Yes, the Agreement in Principle is a credit check. In terms of whether it affects your score, a lot of lenders do what we call a soft footprint. Only you can see it – when you get your Experian report or Checkmyfile, you’ll see a search was done, but no one else does.

If you have a load of credit checks, they don’t say whether the result is good or bad. They just say a search was done. With lots of searches, each reduces your credit score a little bit.

We don’t ever need to do many. We might do one now to get an Agreement in Principle and then another when we do a mortgage application, however much later that is. Having one or two is fine, you don’t need to panic about that.

What’s not so great is on comparison websites, where you put in your details for insurance or a credit card and it asks if you’re happy to be credit checked with several different providers. It can go off and do 15 credit checks in a row. That’s not ideal. But one or two isn’t going to impact your credit score much at all.

How do I apply for an Agreement in Principle if I’m self-employed? How long does it take?

If you’re taking that highly risky approach of doing it yourself, you can go onto a website and it’s just as long as it takes you to fill in their form – maybe five or 10 minutes. You generally get an instant response.

If we do it, it takes us the same amount of time to fill in the form. If it’s urgent, we can drop everything and get it done. Generally, things aren’t that urgent, even if your estate agent tells you they are. But it only takes a few moments. You won’t be waiting a fortnight for it.

What else do we need to know about getting an Agreement in Principle when self-employed?

Just speak to a mortgage broker. Preferably us, but any mortgage broker will help you go to the right lender for you. We have to make sure your information’s right so that the result is right – and you’re not going to be disappointed in a couple of weeks’ time.

Think carefully before securing other debts against your property. Your property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.