Getting a Mortgage Agreement in Principle

An agreement in principle (AiP) can be an important first step to finding the right property for your budget and getting your mortgage application approved.

In this article, we’ll explain what an agreement in principle is, how to get one and why you should use a broker to ensure you get the widest choice of products and the best deal when you apply.

What is an agreement in principle?

An agreement in principle is a document that confirms how much, in theory, a mortgage provider will loan you.

It is sometimes called:

• Decision in principle
• Mortgage in principle
• Mortgage promise

It can be used to give you a good idea of your price range and to show estate agents and sellers that you are serious and have the means to buy the property. Some estate agents (particularly in Scotland) will only arrange a viewing once you have an agreement in principle.

What information appears on an AiP?

There is no standard format for an AiP, but you will usually receive a document that confirms either:

• The maximum amount you can borrow
• That you have been theoretically approved for the amount you applied for
• That your AiP has been accepted by the lender but without confirmation of the amount

A decision in principle, typically lasts for between 30 and 90 days. If your property search takes longer than that, you can usually have it reconfirmed, provided neither your circumstances nor the lenders’ criteria have changed.

What documents are needed to get one?

The documents required are the same as those needed for a full mortgage application.

You will usually be asked to provide:

• Photo ID
• Evidence of income (3-6 month’s payslips for employed borrowers, accounts or SA302s for self-employed mortgages)
• Three years’ address history
• Last three months’ bank statements
• Evidence of existing credit and other outgoings
• Details of the property you want to buy (if you already have somewhere in mind)

Getting a mortgage in principle may be possible without all the documentation above. But it’s best if your advisor has it all, as this will allow them to spot any discrepancies that may not be immediately obvious to you but could affect your eventual application.

How to get an agreement in principle

Follow these steps to get a mortgage promise:

Will it involve a credit check?

Yes. A decision in principle will involve a credit check, but it’s important to know whether it is a hard check or a soft check.

A hard check will provide the lender with all the information they would get if they were applying for a credit check as part of a full mortgage application. This is the most comprehensive check and will leave a mark on your credit files.

Some lenders may carry out a soft check for an agreement in principle. This will not appear on your credit file but may not contain a full breakdown of the information a lender will use to assess your mortgage application.

Most high street lenders now carry out a soft credit check at this stage.

Getting one if you have bad credit

Bad credit is no barrier to getting a decision in principle. If you have had credit issues, it can give you peace of mind that your house hunting will not be in vain. But you may need to approach a lender specialising in bad credit mortgages.

A change in circumstances during the house-hunting process, such as missing a loan payment, can affect your credit score and potentially invalidate your agreement in principle. This is an example of one of the things that can go wrong with an agreement in principle.

Does getting one mean you are guaranteed a mortgage?

An agreement in principle is not a guarantee that you will be approved for a mortgage, but if the information you provide is accurate and circumstances don’t change, you should have nothing to worry about.

There is no limit to the number of AiPs you can have. If one lender approves you but thinks you might get a better rate elsewhere, you can apply again with a different provider. Just be wary of too many hard credit checks.

What to do if you are declined for a mortgage in principle

Don’t panic if you are declined for a mortgage in principle. Each lender has their own risk profile and eligibility criteria, which doesn’t mean your dreams of buying a home are over.

The thing to avoid is going back out and blindly applying with another lender in the hope that the result will be different next time around. You run the risk of further rejections without knowing why your previous attempt was unsuccessful. Instead, you should try to understand why your AiP was turned down.

The brokers we work with have access to the entire UK mortgage market and can often help those who have been rejected find an alternative provider sympathetic to their circumstances.

After assessing your circumstances, they will:

• Discuss why your application was rejected
• Offer advice on how to boost your chances of success next time
• Find you the right lender

Do all lenders offer mortgages in principle?

Lenders are not obliged to offer agreements in principle, but many do. Their exact nature will change from lender to lender, but the benefits are standard regardless of the lender.

An AiP with Nationwide lasts for 90 days, while other lenders offer them for shorter periods. For example, a decision in principle with Santander is only valid for 60 days.

Get matched with a broker to help with your AIP

A mortgage in principle is a great tool for helping you determine how much you can afford to borrow and allowing you to view properties with confidence. It is most useful when you’re confident it reflects the chances of your mortgage application being approved and maximises your borrowing power.

The first step to building confidence is finding the right broker. We work with brokers all over the UK, each with a specialism. Our broker matching service will assess your situation and connect you with a broker who is experienced in helping borrowers like you get the best deal.

To get matched with your ideal broker, call 0330 818 7026 today or enquire online to arrange a free, no-obligation chat.