Getting a mortgage agreement on principle

A mortgage Agreement in Principle (AIP) helps you work out how much you could borrow from a mortgage lender.  Some estate agents may insist that you have one before showing you available properties. 

A mortgage Agreement in Principle (AIP) helps you work out how much you could borrow from a mortgage lender.  Some estate agents may insist that you have one before showing you available properties. 

Mark Gordon
From the Mortgages team
3
minute read
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Posted 12 JULY 2021

What is a mortgage agreement in principle?

An Agreement in Principle (AIP) can also be referred to as a Mortgage in Principle (MIP), Decision in Principle (DIP) or an Approval in Principle (AIP). 
 
To get one, you provide your mortgage broker or potential lender with information about your finances and they give you an indication of how much you’ll be able to borrow. 
 
You can usually get an AIP online through a lender’s website or in branch. You’re likely to receive your results within 24 hours and it is normally valid for up to 90 days.

What do you need for a mortgage agreement in principle? 

To get a mortgage in principle, you’ll need to supply various details about yourself, and anyone else buying a property with you. These include: 

  • Personal details including your name and date of birth 
  • Addresses for the last three years 
  • Details of your income and monthly outgoings 

Getting a mortgage agreement in principle will require a credit check to be carried out. This will look at your credit history, including any past or present loan or credit card debts, to work out whether you’re a suitable applicant. While it may require a hard credit check, estate agents will encourage you, particularly if you’re a first-time buyer, to get an agreement in principle, to reassure everyone that you’re a serious buyer. 

Will getting an Agreement in Principle affect my credit score?

When you apply for an AIP, the lender will run a credit check to assess your eligibility. This will involve the lender assessing your credit history and any past and present debts, like loans and credit cards. You'll need to ask what level of credit survey they do – if the lender runs a 'hard' search, it will leave a 'footprint' on your credit file that will be visible to other lenders. A search footprint is a record left by a credit reference agency every time your credit report is searched, either by yourself or by others. If there are a high number of hard searches in a short period of time, it can have a negative impact on your credit score as it could signal that you're struggling to get accepted by other lenders. 
 
However, if the lender runs a 'soft credit check', it won't leave a footprint and it won't impact your credit score. 
 
To better understand your credit rating, you can request your credit report from credit reference agencies such as Experian, Equifax and TransUnion. 

Is an Agreement in Principle guaranteed?

An AIP is not a guarantee that you’ll get a mortgage offer - you’ll still need to go through the full mortgage application process when you find a property that you want to buy.   
 
An AIP is normally valid for up to 90 days and a mortgage adviser or lender will be able to use the information as part of the full application process. However, they'll want to make sure the details are still correct. 
   
There are factors that may affect the lender’s decision when you make a full application, such as their lending criteria or your personal circumstances having changed.  

What are the benefits of having a mortgage in principle? 

Getting a mortgage in principle is useful, because it proves that you can afford to buy a property. It gives you a better idea as to which properties you can afford, and makes it easier to make offers. It also means you’re taken more seriously by sellers. Estate agents will often ask if you have a mortgage in principle, so it’s good to have it sorted nice and early. 
 
It’s also reassuring for you as a buyer. If you’ve had problems borrowing in the past, perhaps because of a low credit rating, then getting a mortgage in principle is a big first step in buying a property. 

What’s the difference between a mortgage in principle and a mortgage offer? 

The difference between a mortgage in principle and a mortgage offer is that a mortgage in principle is agreed while you’re still looking for a property, while a mortgage offer is made once you’ve been fully assessed. A mortgage in principle is a way of proving that you can afford to borrow enough to buy a property, but it’s not a firm confirmation. A mortgage in principle is useful in getting you started on your search for buying a home, but you’ll need to officially apply for a mortgage, once you’ve had an offer accepted. After you’ve successfully completed your full mortgage application and been through the various credit checks, you’ll then receive your official mortgage offer. 

Can you get a mortgage agreement in principle when you’re a first-time buyer? 

Yes, and getting a mortgage agreement in principle is most useful for first-time buyers. This is because you don’t have a property to sell, to make up the funds towards the purchase. Instead, you’re relying entirely on borrowing with a mortgage (minus your deposit). So, if you’re a first-time buyer, estate agents will often encourage you to get a mortgage in principle, because it will reassure everyone that you’re able to buy. 
 
When you’re applying for a mortgage agreement in principle, the lender or broker will need to run a credit check on you. This will involve searching through your credit history, to confirm whether you’re eligible to borrow the amount you’re asking for. If you’d rather avoid a hard credit check for now, comparing mortgages with Compare the Market doesn’t require any kind of credit check, which means it won’t appear to lenders on your credit report. 

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