Last reviewed on 19th October 2023 by Martin Alexander (Mortgage Advisor)
A mortgage agreement in principle (AIP) shows how much you can borrow from a mortgage lender. Having one gives credibility to a buyer, especially with estate agents.
This guide will explain how to get one and what to look for when applying.
- What is a mortgage agreement in principle?
- How can I get an agreement in principle?
- What documents do I need for an agreement in principle?
- Will an agreement in principle affect my credit score?
- What’s the difference between a mortgage in principle and a mortgage offer?
- Can an agreement in principle be declined?
- What to do next
What is a mortgage agreement in principle?
An Agreement in Principle (AIP) can sometimes be called a Decision in Principle (DIP) or Mortgage in Principle (MIP).
Lenders will provide one once they’ve assessed your finances, giving you an idea of how much you can borrow. It doesn’t offer you any guarantees of a mortgage, nor is it a formal mortgage offer.
You can get an AIP in a matter of minutes from a lender, but it can sometimes take up to a day. They’re valid for up to 90 days but can expire within 30 days, depending on your lender.
How can I get an agreement in principle?
You can ask an advisor for an AIP or apply with a lender. The benefit of using an advisor is that some lenders will allow you to borrow more than others. It’s also easier to communicate timeframes with an advisor than with a lender.
If you decide to apply for an AIP with a lender yourself, you could be waiting longer. The amount you can borrow may also be less than you expected. In contrast, an advisor can tell you the amount beforehand.
You won’t be tied into using the same lender for your mortgage. You can apply for a mortgage with another lender, but using the same lender for both your AIP and mortgage can make the process easier.
What documents do I need for an agreement in principle?
To get a mortgage in principle, you’ll need to provide information about yourself and anyone you’re applying with:
- Photo ID – A passport or driver’s licence
- Proof of address – Lenders will need to know your current address and any other addresses you’ve lived at in the past three years.
- Evidence of income – Your last three months’ payslips or your latest accounts for self-employed borrowers
- Bank statements – Last three months’ bank statements
Lenders will also carry out a credit check to check your current level of debt and outstanding loans to assess your suitability.
Read our mortgage application checklist for more information.
Will an agreement in principle affect my credit score?
Applying for an agreement in principle is unlikely to affect your credit score, but it can leave a footprint.
Typically, lenders only carry out a soft credit check, which won’t leave a footprint or affect your credit score. However, applying with multiple lenders in a short space of time can affect your credit score.
A lender carrying out a hard credit check can leave a footprint on your credit file. Lenders make hard credit checks when they submit a formal mortgage application and rarely for an AIP.
What’s the difference between a mortgage in principle and a mortgage offer?
A mortgage in principle is simply an outline of what you can borrow. On the other hand, a mortgage offer is a formal agreement to offer you a mortgage.
You’ll only get a mortgage offer once a lender has completed a full assessment and a mortgage survey of the home you’re buying.
Can an agreement in principle be declined?
Yes, an agreement in principle can be declined. If this happens, your lender or advisor should tell you why this happened. There are several reasons why lenders might reject an AIP.
If your AIP has been referred, it means an underwriter is taking a closer look at your application, as something is unclear. A referred decision is different from being declined, and your advisor can rectify what the underwriter needs clarification on.
What to do next
If you’re ready to apply for an AIP, you can speak to an advisor to get started. We’ll then look at your details to ensure a mortgage is likely before applying with a suitable lender.
About the author
Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.