Mortgage Agreement in Principle

It is unlikely that lenders will approve your mortgage prior to you submitting a full application. However, many lenders will provide you with an Agreement in Principle (AIP) when you first start looking for a mortgage. These are otherwise known as a Decision in Principle (DIP) and provide you with an idea of how much a mortgage lender may allow you to borrow. Doing this with potential lenders can give you with the opportunity to consider the mortgage options available and begin budgeting.

What is an Agreement in Principle?

An AIP is an early step in your home-buying journey. This process will give you an estimate of what you might be able to borrow based on information you provide to your lender about your finances, supported by a soft credit check. Prequalification is also an opportunity to learn about different mortgage options and work with your lender to identify the right fit for your needs.

Before you can get an AIP, lenders may look at several factors which include:

  • Your credit history: this varies from lender to lender, but a soft search on your credit profile will confirm your history at this stage.
  • Affordability: this is assessed based on all your incomes and outgoings.
  • Current and previous employment

Lenders will look at this information to assess your personal situation and confirm your monthly payments will be affordable.

How do I get an Agreement in Principle?

You can obtain a Mortgage AIP by getting in touch with a lender. They will discuss your personal situation and consider your requirements. Following this you will be provided with an AIP, which can be progressed to a full application once you are in a position to progress. This is most commonly done once you have had an offer accepted on a property. At this point, the lender will complete a mortgage application with you.

When should you get a mortgage Agreement in Principle and how long does it last?

At the Tipton, our mortgage AIP certificates are valid for 3 months from the date of issue.

Lenders will impose an expiration date on these as your financial circumstances can change. When the AIP expires, you will need to begin the journey again in order to obtain a new one.

Does this process affect my credit score?

When considering your mortgage AIP, we complete a soft credit check. This doesn’t impact your credit score but will be recorded, meaning other providers will not be able to see the check. A soft credit check allows lenders to understand your financial behaviours. At the later stages your mortgage application a hard credit check will be completed. This will allow us to see your credit report. Each hard check is recorded on your report and will be visible to other providers. We need to do this to get a full picture of your credit history to determine if you meet our lending criteria. Other providers may determine if they can lend to you using your credit score alone, without looking at the wider picture. It is important to understand that multiple hard credit checks over a short period of time can affect your credit score.