Updated: December 16, 2021

What Do You Need For An Agreement in Principle?

Not sure what you need for a mortgage agreement in principle? Find out what documents are required and how to boost your chances of approval in our guide.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: December 16, 2021

An agreement in principle (AIP) is an important first step in the mortgage application process. Once passed this point, you can more confidently make a firm offer on a property, based on the estimate of what a lender could be prepared to let you borrow, and on what terms.

By following this guide you’ll have a better understanding of what the process of getting an AIP involves, why it’s so important and where to look for any assistance you might need.

What are you looking for?

What is an agreement in principle?

An agreement in principle (AIP) is a critical part of buying a new home. In effect, it’s an official estimate from a mortgage lender of how much they’re prepared to let you borrow, as long as all other requirements are confirmed.

AIPs are often referred to as a mortgage in principle, mortgage promise, decision in principle and an approval in principle. In home buying terms an AIP is similar to a first job interview. You’re a step closer to getting your foot in the door but you’ll inevitably be facing tougher scrutiny in the next round.

Although many mortgage lenders view the AIP stage as a mandatory step in the mortgage process, others don’t see it as essential and are happy to move straight to full application.

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Why is it important?

Although not always mandatory, there are several reasons why an AIP is important:

Bullet Tick It gives you an indication of how much you can realistically borrow
Bullet Tick It proves to the estate agent that you’re not a time-waster when booking viewings
Bullet Tick It puts you in a stronger negotiating position when making an offer
Bullet Tick It helps avoid any nasty surprises further down the line

However, it’s worth bearing in mind that securing an agreement in principle doesn’t guarantee a mortgage. The lender could still turn you down when you submit the full application, which is why it pays to do your homework to get over that first hurdle.

How to get an Agreement in Principle

Getting an AIP is a relatively straightforward process. Essentially, the mortgage lender makes provisional checks to determine whether you can afford to borrow the amount you’re asking for.

To do this, lenders will need to see:

Bullet Tick 3-6 months' of bank statements
Bullet Tick Proof of your income
Bullet Tick Identification and your last 3 years’ address history

If you apply for a mortgage from your current account provider, an AIP can often be made within 15 minutes. This is mainly because your bank already has evidence of your income and outgoings and knows what you can afford to borrow.

However, there’s no guarantee that using your existing bank or building society will mean you’ll secure the best rate offer available. The best way to do this is by using the services of an experienced mortgage broker.

Depending on the lender, and whether you go through a mortgage broker or not, a decision can sometimes take a few hours and in rare cases, a few days. Once you have your AIP you know roughly how much you can borrow and will be taken more seriously by the seller and estate agent if you decide to make an offer.

Credit checks required for an agreement in principle

Applying for a decision in principle means the mortgage lender will need to carry out a credit check.

Essentially the lender wants to know…

Bullet Tick How much you have borrowed in the past
Bullet Tick Whether you made all your repayments
Bullet Tick Whether you made the repayments on time
Bullet Tick How much you are currently borrowing
Bullet Tick If you have financial associations with anyone who has a bad credit history

It’s a good idea to download your credit reports before approaching a lender so you can review your credit scores and amend any outdated and/or incorrect information which may be on the report.

What’s the difference between a hard search and a soft search?

There are two types of credit check – a soft credit check (or soft search) and hard credit check (or hard search).

Most lenders run a ‘hard’ credit search before offering you an agreement in principle. This is a search that leaves a mark on your credit file. So, you don’t want to apply for several AIPs at once.

Too many ‘hard’ searches in a short space of time raises concerns that you’re desperate to borrow. However some lenders will run a soft search, which doesn’t impact your credit rating.

Which is why it makes sense to speak to a mortgage broker, particularly if you’re concerned about securing a mortgage in principle due to bad credit. They’ll already know the best lenders to approach based on your circumstances and advise on any additional information that could help swing the decision.

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You’ve received an agreement in principle – what next?

Once the lender has offered you an AIP it’s time to get searching for a property, assuming you haven’t found one already. You’ll now know precisely what properties are in your price range. And once you’ve found that dream home you can put in a serious offer.

Don’t pop the champagne just yet, though. In rare cases, you may find that the lender who offered you a mortgage in principle has changed its lending criteria. Which means you need to find another mortgage provider.

On the flipside, you’re under no obligation to proceed with the lender that’s offered you an AIP. A better interest rate might become available from a different lender. So, don’t stop looking just because you have one AIP in place.

Better still – ask your broker to look for you! Saving you a lot of time and, potentially, some money too.

What if your agreement in principle was declined?

The most important point is to not panic. There are a number of reasons why you may have been turned down for a mortgage in principle. Such as:

Bullet Tick Poor credit history
Bullet Tick Insufficient income to cover repayments
Bullet Tick Not enough deposit
Bullet Tick Your overall profile sits outside the lender’s eligibility criteria

Admittedly, some reasons are more serious than others. However it could be something as simple as forgetting to register for the electoral roll the last time you moved.

If your AIP is declined – speak to a broker. They’ll be able to establish why this has happened and suggest alternatives so you can get your mortgage application back on track.

Get matched with an experienced mortgage broker

It doesn’t matter whether you’re buying your first or fifth property, the mortgage application process can be a minefield. To ensure you get the AIP and, ultimately, the mortgage that is most appropriate to your circumstances it’s best to speak to a professional.

Our free, broker-matching service will quickly assess your needs and circumstances to pair you with a mortgage advisor who’s ideally placed to help you – Make an enquiry to get started.

FAQs

Can I get an agreement in principle with bad credit?

All lenders have different eligibility criteria. Some lenders specialise in offering mortgages to those that don’t have a perfect credit history. If you are worried that your credit score could impact your ability to get an agreement in principle it’s best to speak to an independent mortgage advisor who has access to specialist bad credit mortgage lenders.

Can I put an offer on a house without a mortgage in principle?

It is possible to make an offer without an AIP in place. However if you are up against a buyer who already has their AIP they will be taken more seriously by the estate agent and seller.

How long is a mortgage in principle valid for?

You will need to check with your individual lender but generally they are valid for between 30 and 90 days.

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

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FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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