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Getting a mortgage agreement in principle

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HomeContact UsGetting a mortgage agreement in principle

Getting a mortgage agreement in principle

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Last reviewed on 2nd March 2022

A mortgage agreement in principle (AIP) is usually the first indication that you’re likely to get a mortgage and shows how much you’d be able to borrow. You can then begin your property search with confidence and a budget in mind. Having this document also gives credibility to you as a buyer.

You can apply for a mortgage in principle online by making an enquiry. We’ll then run through your details to check what’s possible.

What is a mortgage agreement in principle (AIP)?

A mortgage in principle can also be referred to as an Agreement in Principle (AIP) or a Decision in Principle (DIP). The document will outline how much you’re able to borrow based on your financial details. This is not a formal mortgage offer but it is an agreement in principle based on the information you’ve provided.

A mortgage in principle is an agreement to lend funds based on your:

  • Income
  • Outgoings
  • Credit score
  • Employment status

How long an AIP valid for?

An agreement in principle is usually valid for either 60 or 90 days. Lenders and brokers charge different rates and fees to produce the agreement.

What will I need for a mortgage agreement in principle?

You will need to provide personal documents before you can be given an agreement in principle. Lenders and advisors have a legal duty to verify your personal circumstances and identity. For this to happen, you’ll need to provide certain documents, including:

  • Photo ID – A passport or drivers licence
  • Proof of address – Utility bill or bank statement
  • Income and outgoings – 3 months payslips, bank statements or accounts/SA302 documents
  • Credit card statements – Or statements of any outstanding debt
  • Proof of deposit – Bank statement or signed confirmation for gifted deposits
  • Credit reports – Especially if you have credit issues within the last six years

If you’ve found a property already, then your advisor will also need the details of your purchase. Your advisor will also need to know what type of mortgage you’d be applying for, such as buy to let or residential. Read our mortgage application checklist here for more information.

Will an agreement in principle affect my credit score?

Most mortgage lenders will carry out a credit check prior to providing an AIP. It’s important to note that credit checks for an AIP can leave soft footprints on your credit file. Although a soft footprint may be left on your credit report, it doesn’t indicate that you’ve applied for credit. In comparison, a hard footprint indicates that an application for credit has been made and happens when you apply for a mortgage.

Multiple footprints can lower your credit score and can limit your chances of mortgage approval. This is why it’s never advised to apply with multiple mortgage lenders in a short space of time.

What if I have a poor credit score?

A great credit score doesn’t guarantee you’ll get an agreement in principle. This is because lenders each have their own criteria. Lenders will also assess your income, employment, mortgage type and deposit amount in addition to numerous other areas. A credit check is only part of your mortgage assessment. That said, having a poor credit score can make getting an AIP difficult.

It’s highly advised to use a specialist broker from the start. This is to avoid making multiple applications with lenders which will eventually damage your credit score. Selecting the correct lender is important in protecting your credit file and securing a great mortgage deal. Experienced advisors understand each lender’s criteria and can select the most suitable lender that is most likely to accept your application.

Read more about making an online mortgage application here.

Does an agreement in principle guarantee a mortgage?

You can still be declined a mortgage, even if you’ve been approved an agreement in principle. This isn’t to be confused with a formal mortgage offer, which takes place once a full application has been submitted. Once you’ve had an offer agreed on a property, this is when your lender will make you a formal mortgage offer.

You may be declined a mortgage after an AIP in the following circumstances:

  • Being unable to provide requested documents, such as proof of ID or bank statements
  • If the initial details you’ve provided are incorrect
  • You have too much outstanding credit/debt
  • The property doesn’t meet the lender’s criteria
  • Credit issues after the AIP and between the mortgage application

If an advisor is managing your mortgage application, they can ensure that all your documents are in order before applying. In addition, an advisor can also check your application is structured correctly to maximise your chances of being accepted.

What’s the difference between a mortgage offer and an AIP?

An agreement in principle doesn’t guarantee that you’ll get a mortgage. It’s simply the first step in outlining what you’re likely to be able to borrow and whether or not you’re likely to be approved. A mortgage is only offered formally once a mortgage survey has been carried out and you’ve undergone a full mortgage application.

This doesn’t in any way make a decision in principle a pointless exercise, as the majority of estate agents will ask to see proof of an AIP.  Getting an agreement in principle is usually considered to be the first step in getting your mortgage.

ask a mortgage broker

Advantages of having a mortgage in principle

If you’re aiming to purchase a property with a mortgage, an AIP can be very beneficial. For instance, a mortgage in principle can:

  • Give you an indication of how much you can borrow
  • Allow you to make accurate offers on properties
  • Make your offers more credible and gives estate agents confidence
  • Give you the ability to secure a deal, even in cases where time is of the essence
  • Place you in a stronger position than buyers who don’t yet have an AIP

Do I require an agreement in principle?

No, an AIP is not compulsory but it can help you with understanding your budget and whether or not you’re likely to be approved. That being said, you could apply for a mortgage straight away but it’s certainly riskier doing it this way.

You may be asked by estate agents if you have an AIP when viewing a property. Your mortgage advisor can provide you with an agreement in principle once you’ve provided the necessary information your advisor has asked for. Estate agents are often inclined to accept offers from those who have the paperwork ready, such as an AIP to hand. This is because it shows your seriousness as a buyer.

My agreement in principle has been rejected

If you’ve been declined a mortgage, your lender or advisor should tell you why your application wasn’t approved. There are a number of reasons why lenders might decline a mortgage application. Our advisors are specialists and are used to dealing with difficult mortgages. If you’ve been declined, you can make an enquiry to check if there are any lenders suited to your criteria.

If your AIP has been referred, it means that an underwriter is taking a closer look at your application. A referred decision is not the same as being declined. If this does happen, then your advisor should try to iron out anything that the underwriter isn’t clear about.

I need an AIP fast

Having an AIP to show estate agents that your offer is credible can sometimes be the difference in your offer being accepted or rejected. If you’ve seen a property and need to move fast, our advisors are on hand to help.

The majority of our cases are carried out online, using the latest technology to accelerate the online application process. This can save you a lot of time and furthermore, you’re able to apply for a mortgage irrespective of your location.

How do I get a decision in principle for a mortgage?

If you need a decision in principle as soon as possible, make an enquiry and an advisor will call you back to arrange this for you. Your advisor will explain the process in greater detail in relation to your current situation. You may need an AIP urgently to secure a property or you may have had a mortgage declined. Even if you simply wish to know how much you can borrow, we can help.

You can approach a lender yourself, but you will be limited to each lender’s own products. Using a broker that is independent enables you to access the best deals across the UK mortgage market. This is because independent brokers have access to every lender and aren’t limited to certain mortgage deals.

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About the author

Mortgage Advisor | More Articles

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.