Mortgage agreement in principle
A mortgage in principle (MIP), also known as an agreement in principle (AIP) or decision in principle (DIP), is an estimate of how much you may be able to borrow for a mortgage. Getting a MIP is usually the first step you’ll take before searching for a property or a new mortgage deal.
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What is an agreement in principle?
An agreement in principle (AIP) is a theoretical agreement from a lender indicating how much they would be willing to lend, assuming you meet their full criteria when you apply.
Whether you call it a decision in principle (DIP), a mortgage in principle (MIP) or a mortgage promise, this useful document provides a more precise estimate than a mortgage affordability calculator.
Importantly, an agreement in principle is not a formal mortgage offer, and you are not obligated to proceed with the same lender. So you can still change your mind if you find a better deal elsewhere once you’re ready to apply.
The difference between a mortgage in principle and an agreement in principle
Both a mortgage in principle and agreement in principle give you a good idea of how much you might be able to borrow but there are some key differences:
Mortgage in Principle (MIP) – Typically provided by a mortgage broker, comparing your eligibility and affordability across multiple lenders to estimate your maximum borrowing potential.
Agreement in Principle (AIP) – Provided by an individual lender, giving you a tailored borrowing estimate based on their specific criteria.
If you’re looking for a mortgage in principle comparison across a wider selection of lenders, a MIP from a broker could be a good option for you.
Why get an agreement in principle?
Focus your search on properties most affordable for you
Most lenders only perform a soft credit check, meaning getting an AIP won’t impact your credit score
Speeds up the viewing process - some estate agents require you to have an AIP before arranging viewings
Shows sellers you’re a serious buyer who could, in theory, afford to purchase their property. This could work in your favour when negotiating!
When should I get a mortgage agreement in principle?
It’s a good idea to get one as soon as possible when you decide to look for a home, as this will save you the disappointment of looking at properties that are out of reach. It can also prevent any potential delays in viewing properties, should the estate agent insist that you have one.
While it is technically possible to view properties and even put in an offer without an agreement in principle, already having one in place can speed up the mortgage application process once you’ve chosen your home as the lender will already have your information.
What information do I need to get a mortgage agreement in principle?
To get the best mortgage in principle that takes into account your personal circumstances, you’ll need to supply most of the information you’d need to make a full application. This reduces the risk of any nasty shocks when the lender processes your formal mortgage application.
If you’re applying jointly with others, ensure you have these details for all applicants too!
Personal identification - name, date of birth, passport or similar official identification
Income details - payslips (at least 3 months for employees) or tax calculations (typically 2-3 years for self-employed applicants)
Address details - full address history to cover the last three years, with proof if possible. This will be requested at application stage so it’s worthwhile having it to hand
Details of outgoings - If possible you should provide bank statements, as these will be requested at application stage. If not, a full list of your current outgoings and financial commitments, including debt repayments will be needed
Credit report - Though your broker or lender will usually just run a soft credit check at the MIP stage, it's unlikely you'll get a mortgage without a full credit check. So it's a good idea to be aware of what's on yours before you apply! You can obtain a copy of your credit report for free from a number of credit referencing agencies, such as Experian
A mortgage agreement in principle can be particularly useful for first-time buyers. Knowing roughly how much you can afford to borrow can be a big help when searching for properties. Plus, estate agents are more likely to take your interest seriously if they know you can afford to buy the property you want to view! ”Laura Hamilton, Mortgage Expert
Does an agreement in principle affect your credit score?
In most cases, no it won’t. Most lenders use a ‘soft search’ during a decision in principle application, meaning it won’t leave a mark on your credit file. If you’re concerned, ask your mortgage broker or lender whether they will do a full credit search or not.
Lenders typically only perform a full credit search when processing a formal mortgage application. However, being transparent about any credit issues at the AIP stage can help prevent delays or disappointment when you apply for your mortgage in full.
How long does an agreement in principle last?
AIPs typically last around 90 days, though this can vary by lender. So, unless any of your personal circumstances change within that three month period, you can be fairly confident about the property value you can afford.
Keep in mind that if you need to apply for a new AIP because it’s taking longer than anticipated to find a suitable property, the amount you could borrow may have changed, even if your personal circumstances haven’t. This is because changes to the Bank of England base rate and other industry factors, such as property values, can impact the LTV lenders are willing to offer at any time.
Does an agreement in principle guarantee a mortgage offer?
No it doesn’t, it’s simply a preliminary agreement, assuming you meet the lender criteria once they’ve assessed your supporting documents and conducted the credit check on application.
There are multiple benefits to securing a decision in principle, however and as you’re not bound by an AIP you won't have to miss out on a better deal if you find one later in your search.
Can I get more than one agreement in principle?
Yes it’s possible to get them from a number of lenders to compare which one would potentially offer you the best terms.
However, filling out multiple different applications to find the best AIP for you can be time-consuming. It’s usually quicker to go to a broker who can compare your options for you and help you choose the most suitable lender before you apply.
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Mortgage agreement in principle FAQs
What happens after getting an agreement in principle?
The mortgage application process after getting an AIP looks like this:
Look for your new home and put an offer in
Share details of the property with your broker or lender
Compare mortgage products and decide on the right option for you
Start the formal mortgage application process
Why would a mortgage agreement in principle be declined?
If a lender can see from your initial information that you are unlikely to meet some of their criteria or pass a credit check, it’s unlikely that they will issue an agreement in principle.
This is a good indication that you are possibly not yet mortgage ready. It might be best to speak to a mortgage broker, who can help you to prepare for a successful application.
What is the difference between a mortgage in principle and a mortgage offer?
A mortgage agreement in principle is a sort of pre-offer, which is not guaranteed until you go through the full mortgage application process and receive a formal mortgage offer.
Lenders can change the terms of your AIP at application stage, especially if any of your personal circumstances have changed, so it does not guarantee that particular lender will offer you a mortgage.
Of course, having a mortgage application refused by one lender does not mean that you won’t be able to get one with another. A mortgage broker can help you to compare your mortgage options and approach the lender most likely to approve your application first time.
Why might a mortgage offer differ from your agreement in principle?
There are a number of reasons your mortgage offer might differ from your agreement or decision in principle, including, but not limited to:
Your financial circumstances have changed since you applied for the AIP
Your credit file reveals information that changes how risky the lender considers your application
The lender’s valuation of your property is more or less than your AIP reflects
Market changes - such as when the mini-budget in Autumn 2022 led to lenders restricting their LTVs and tightening their criteria generally
The best way to avoid this is to move quickly when you have an AIP in place. It’s not always possible to find your perfect home quickly, of course, so you may need to get a new AIP before you continue your search if your old one expires.
Can I get an agreement in principle without a credit check?
Most brokers or lenders will run a credit check when you apply for a mortgage decision in principle, though they usually opt for a soft credit check which has no impact on your credit score.
If you’re looking for a very general idea of how much you might be able to borrow without a credit check, a mortgage affordability calculator could be a good option. It’ll give you a rough estimate based on your income and deposit size.
Do remember that a hard credit check will always be conducted once you submit a formal mortgage application, though. If you’re concerned your credit history might hold you back, it’s best to speak to a specialist broker who will be able to look into your options.
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