An agreement in principle (AIP) is where you pass a Lender credit score to qualify for a mortgage. It is also referred to as a decision in principle. Once you have your AIP and looked into some first time buyer mortgage advice you can go ahead and make an offer on a property. Having an agreement in principle certificate can sometimes help a first-time buyer negotiate a lower asking price. This is because the seller knows you are serious and have the funds to proceed.
Some agreements in principle affect your credit score. More and more Lenders these days carry out soft searches. If the Lender says they do a soft search then your score should be unaffected. A soft search doesn’t always dig as deeply as a hard search but you can usually rely on the decision the Lender makes as being correct either way.
The odd hard search here and there shouldn’t make too much difference. However, if you have several hard searches in a short period of time this will have an adverse affect on your score. If you know you have a good credit rating and the Lender with the best deal does a hard search you shouldn’t let this put you off.
An agreement in principle is not a guarantee that your mortgage application will be accepted. The Lender will need to see all your documents and only then will an underwriter make the final decision. Agreements in principle are full of small print and often clients ring us having being declined at full application stage. You will need to provide ID to prove who you are, payslips to prove how much you earn and bank statements to prove you conduct your finances well before a Lender will offer your case.
You can make an offer without an agreement in principle but we wouldn’t recommend it. An estate agent worth their salt will want you to prove you have the means to proceed.
You can obtain an agreement in principle within 24 hours of speaking with a mortgage advisor.
An agreement in principle can typically expire after 30-90 days. Don’t worry though, just because you have got an agreement in principle it doesn’t mean you have to buy the first house you see! We think it’s a great idea to get an agreement in principle as early as possible to avoid the disappointment of finding a house and then being declined for a mortgage. If your agreement in principle expires it’s easy enough to get it refreshed when you are ready to make an offer.