A mortgage in principle, known more commonly as an agreement in principle, but also as a decision in principle, is an incredibly useful tool to help you understand how much you could potentially borrow, before you formally apply to take out a mortgage.
When you have an agreement in principle, it will mostly involve a soft credit check, though a hard credit check might occur. As such, with the soft credit check, your credit score is unlikely to be affected. You are also under no-obligation to proceed after obtaining this.
Here at UK Moneyman, we are usually able to get this for our customers within 24 hours of your initial mortgage appointment.
Your agreement in principle will only last for somewhere between 30-90 days, though this is usually sufficient for finding a property. If this runs out, your agreement in principle will need to be renewed, though this is something we are able to arrange for you once again.
In order for you to be able to obtain a mortgage agreement in principle, you typically either have speak to a mortgage lender or get in touch with a trusted mortgage broker, like ourselves, who can liaise with the mortgage lender on your behalf, to obtain this for you.
Getting in touch with one of our mortgage advisors can be done either via our Get Started online form or by giving us a call on 0800 029 3757. Doing so will allow you to book a free mortgage appointment, where you can chat to an expert and obtain your AIP within 24 hours.
In order to progress and obtain this document, you’ll need to provide proof of your income, employment, credit history, and other personal details that will help assess your eligibility for a mortgage. This will also provide you with an estimate of how much you might be able to borrow.
It would be a good idea for you to look at getting a mortgage agreement in principle, prior to your property hunt. This is so that you can get general estimate out how much you are able to borrow, so that you aren’t looking at properties beyond your range.
In addition to this, having an agreement in principle can give you an advantage when it comes to making an offer on a property.
Sellers and estate agents may view you as a serious buyer if you have an agreement in principle, which could give you the advantage over other potential buyers who do not have one.
It’s worth noting that an agreement in principle is not a guarantee that you will in fact be able to obtain a mortgage, but it can be an incredibly helpful tool when you are going through the process of buying a home.
When a mortgage advisor looks at obtaining an agreement in principle for you, they will need some personal information from you to pass on to the mortgage lender, in order for them to determine the amount they are willing to lend to you. This includes:
It’s important to note that mortgage lenders may also request further details from you, such as bank statements or proof of income (this may occur if you are self employed), before making a final decision on whether they are going to lend to you.
An agreement in principle (AIP) is a document that will outline how much a mortgage lender is willing to lend you, if at all, based on the information you have provided them. It is not a guarantee that you will be given a mortgage offer, nor is there any legal contract in place.
A mortgage offer is a formal offer of a mortgage from a mortgage lender, which will confirm that they are going to lend to you, based on their prior checks. This is one of the final stages of your mortgage process.
Your mortgage offer will be legally binding (if you accept it) and will outline the terms and conditions you have agreed for your mortgage. This will include the interest rate, your mortgage term and any fees or charges you are due to pay.
In order to get to this stage, you will need to provide the mortgage lender (via your mortgage broker if that is the route you have taken) with more detailed information and undergo a full credit check.
The mortgage lender will also require you to have a valuation of the property you want to buy taken out.
You can learn more about this in our article “What are the different types of property survey?“
Once you have received your mortgage offer, you are able to move forward with your property purchase, providing that you meet any conditions that have been outlined in the offer.
In summary, an agreement in principle is a very useful tool for letting you know how much you are able to borrow, whilst a mortgage offer will be a formal offer given to you by a mortgage lender, legally binding both parties to the terms and conditions set out for the mortgage.
In almost all cases, obtaining an agreement in principle for a mortgage will not have any major impact on your credit score. This is because virtually all mortgage lenders will only be performing a soft credit check when providing an AIP, which will not leave a visible trace on your credit report.
That being said, it is worth noting that some mortgage lenders may perform a hard credit check as part of the agreement in principle process, which can leave a visible record on your credit report.
This in turn could potentially impact your credit score, especially if you have applied for multiple AIP’s with different mortgage lenders, within a short period of time. It is important to note that a mortgage application itself will typically involve a hard credit check, which can impact your credit score.
With all of this in mind, it is generally more advised that you limit the number of mortgage applications you make and only apply for an agreement in principle when you are serious about proceeding with your property purchase.
Having an agreement in principle will leave you with several benefits when it comes to applying for a mortgage.
First of all, having this will allow you to get a good idea of the amount you are able to borrow. This in turn can help you focus your attention to properties within a realistic price range. In doing so, this will save you time and disappointment that could occur, had you not been able to afford a property you like.
Secondly, having an AIP will give you a much needed advantage over other buyers when it comes to making an offer on a property. A seller may be more likely to accept an offer from a buyer who already has an AIP, as it will show that they are in fact serious and are actively trying to secure a mortgage.
Finally, having an AIP can also help to speed up the mortgage application process once you have found a property you would like to buy.
The reason for this, is because the mortgage lender has already conducted an initial assessment of your financial situation and eligibility, so they may be able to process your mortgage application in a more quicker and efficient way.
Overall, having an AIP can be incredibly useful for anyone who is looking at purchasing a property, as it helps you understand how much you can borrow, puts you ahead of other home buyers and also can make the mortgage process much quicker.
Obtaining a mortgage agreement in principle is typically free of charge. It is simply a statement from a mortgage lender that will outline how much they would be willing to lend you, based on the information you have provided. There is no financial commitment involved with an agreement in principle.
If you find that you are rejected for a mortgage agreement in principle, it means the mortgage lender has determined that you are not eligible for the amount of mortgage you have applied for. There are varying reasons as to why this may have happened.
Of course in this situation, it is important to find out why. You may need to take a look at your finances or credit history, or you may need to provide additional information to the mortgage lender.
In some cases it’s back to the drawing board and finding a mortgage lender who will lend close to, if not the full amount that you are looking to borrow. It is important to remember that being rejected for an AIP does not mean you will be automatically rejected for a full mortgage application.
The mortgage lender will look at your financial situation and credit history in more detail when you submit a full application and they may end up offering you a different amount or a different type of mortgage.
It is also worth noting that applying for multiple agreement in principle with different lenders can negatively impact your credit score, so it is important to research beforehand. Having a mortgage broker on your side can help with you finding the right mortgage lender, hopefully first time!
If you are looking at first time buyer mortgages or home mover mortgages, it is recommended that you speak to a mortgage broker so that you can get you your agreement in principle, prior to you making any offers on a property.
Typically, we will be able to obtain an AIP for you within 24 hours of your initial mortgage appointment, which can be useful for you as you traverse your mortgage journey.
Book your free mortgage appointment today and we’ll look at getting you your agreement in principle as soon as possible, as you begin your mortgage journey with a mortgage broker by your side.
Last Edited 14/04/2023