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What is a mortgage certificate?

A mortgage certificate is sometimes referred to as lending certificate, Decision in Principle (DIP), Agreement in Principe (AIP) or a mortgage promise.

It’s a document designed to help homebuyers confirm to estate agents that they can follow through on the offers they make on properties.

The mortgage certificate shows that they have their finances in order without them needing to perform multiple credit checks every time they wish to express interest in a property.

As representatives of property sellers, estate agents will commonly request a mortgage certificate to ensure that interested buyers can meet the asking price, so that no unnecessary time is wasted.

The mortgage certificate is a confirmation from the buyer’s lender stating that it is prepared to lend them the sum of money required, should a transaction go forwards. This is why it is often referred to as a DIP or AIP.

How mortgage advisors with a CeMAP qualification can help with mortgage certificates

To get an assurance on how much they can borrow realistically, prospective buyers must complete a mini application to submit to the lender.

A qualified mortgage advisor is often called upon to help their clients complete the application. They are taught the best ways to assist during the application stage when undertaking their Certificate of Mortgage and Practice (CeMAP) qualification, which provides them with a comprehensive understanding of the full process of acquiring a mortgage.

Expert mortgage advisors also use their experience and insight regarding different lenders, and the criteria that they use to help their clients. This gives them the best chance of having their application accepted and securing a mortgage certificate. For instance, some lenders don’t include childcare costs when they calculate affordability, and others will factor in bonuses and overtime more generously than others, increasing the success rate of applications.

Advisors also know which lenders work quickly when buyers want to get their DIP fast, so they can move on a property they want. Processing speeds can vary from quick turnarounds of 24 to 48 hours, to up to three weeks for the lender to issue a mortgage certificate.

Factors considered by lenders providing a mortgage certificate

Lenders will take several factors into account when reviewing applications.

These include the monthly repayments that a buyer can afford based on their income and expenses, but also their credit history.

Typically, a lender will carry out a “soft” credit check from at least one, bust sometimes more agencies specialising in credit referencing. However, other lender criteria might include property type and location, along with the age of the borrower.

How a mortgage certificate is obtained

The initial step for those seeking a certificate is to meet with their mortgage advisor.

The advisor will ask them questions about their financial circumstances to understand their unique situation and provide tailored help.

Questions will focus on a person’s regular income and expenses, other revenue streams, credit history and the size of the deposit they can access.

The benefit of using an independent (or whole-of-mortgage) advisor is that they use the information given by their clients to search thousands of mortgage products and seek out the best deals possible for their personal circumstances.

On average, there are more than 10,000 mortgage products that are available at any given time, so having an expert eye can be of great benefit in narrowing the field.

The alternative is for buyers to speak to a building society or bank directly, or a tied mortgage advisor who works with them. This option is typically more limited, and only provides products in a small range of around five to 10 mortgages.

What happens when a mortgage certificate application is declined

One of the important roles of mortgage advisors is help manage their expectations and alleviate worries.

Advisors should always stress that for several reasons, a mortgage certificate application may be declined. However, there are many lenders, and a rejection from one does not mean that all will decline an application.

Some reasons for an application to be declined can quickly be resolved, like a client not being listed on the electoral register, or having an outdated address still connected with a form of identification or bank account. However, other reasons may include how clean their credit record is, or whether their level of debt is too high, or a payday loan has been taken out in recent years.

Specific lender criteria can also come into play, like the buyer’s age or profession, or the property type and area it is located in. Mortgage advisors can help their clients understand the steps they can take to improve their applications, but also tailor the process to include lenders with less strict criteria.

CeMAP Mortgage Advisor Training

At Beacon Financial Training, we specialise in providing would-be mortgage advisors with the skills and certification they need to practice. To find out more about our full selection of CeMAP study courses, contact us today.

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