Getting a Mortgage Agreement in Principle
Everything you need to know about getting an agreement in principle and how a mortgage broker can help you
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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.
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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)
It may be possible to get a mortgage in principle without all of 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:
You’ll need a proof of deposit for a mortgage in principle, so make sure you can prove where it came from. For borrowers who have put money aside in a savings account this is simple.
However, if you have been gifted a deposit or are self-employed and are looking to use proceeds from your business there may be some complications that require professional advice.
Get all your documents together. The more evidence you can provide, the more confident you can be when you receive your agreement in principle.
Speak to a whole of market broker. You could go directly to a lender, but the advisor you speak to will be limited to that providers’ products.
A broker has a wider pool of lenders and products to choose from and can find the right deal for your individual circumstances. This can include using specialist lenders who don’t have a high street presence as well as exclusive deals only available through intermediaries.
It also helps limit the number of hard credit searches, so protects your credit file.
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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 same 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 choose to just carry out a soft check for an agreement in principle. This will not show up on your credit file but may not contain a full breakdown of the information a lender will use when assessing your actual 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. In fact, 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 who specialises in bad credit mortgages.
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.
And there is no limit to the number of AiPs you can have. If you are approved by one lender but think you might get a better rate elsewhere, you can apply again with a different provider. Just be wary of too many hard credit checks.
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I found Online Mortgage Advisors after I read lots of ratings online and I was not disappointed! I received a message soon after I initiated contact and within a week I received an Agreement in Principle. Very happy with results.
Nathan has been so great from the first day, within a day I received AIP. Although still a longway to go, Nathan's so far has been great! keep up team
Great response, very quick and efficient. I was having little luck getting any sense out of the high street lenders as I wished to relocate. Within 24 hours of making contact with my advisor, I had an agreement in principle.
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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, and it 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. Without knowledge of why your previous attempt was unsuccessful you run the risk of further rejections. Instead, it’s important that you 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 to find an alternative provider that is 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. The exact nature of them will change from lender to lender, but the benefits are pretty 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. And it is of most use when you’re confident it both reflects the chances of your mortgage application being approved and maximises your borrowing power.
The first step to finding that confidence is to find the right broker. We work with brokers all over the UK, each with their own specialism. Our broker matching service will assess your situation and put you in touch with a broker who is experienced in helping borrowers just like you to get the best deal.
To get matched with your ideal broker, call today on 0808 189 2301 or enquire online to arrange a free no-obligation chat.
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It depends on how complex your circumstances are but a straightforward decision in principle can sometimes be completed in just a few minutes.
Yes. Some lenders allow you to apply online. But we still recommend you speak to a broker first to ensure you are applying to the right lender and allow you to ask any questions you may have before agreeing to a credit check.
Most lenders (and brokers) won’t charge a fee for an agreement in principle. Fees and charges only usually apply once a mortgage offer has been secured.
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