An Agreement in Principle (AIP) is the first step to getting yourself a mortgage offer, so let's look at all things AIP.
By the end of this chapter you’ll understand:
✓ What an Agreement in Principle (AIP) is
✓ Why it’s one of the first things you should arrange
✓ What information you’ll need to get one
✓ How long it normally takes
✓ What are the steps after getting an AIP
Estimated Reading Time: 8 minutes
Imagine spending weeks looking at homes. You find one you absolutely love. You arrange a viewing. You decide it’s the perfect property. Then someone asks:
“Have you got an Agreement in Principle?”
If the answer is no, you may have to press pause on your home-buying journey while you arrange one. That’s why obtaining an Agreement in Principle is often one of the very first things we recommend. It gives you confidence, shows developers you’re serious and helps you understand your budget before you start falling in love with properties.
What is an Agreement in Principle?
An Agreement in Principle (sometimes called an AIP or Decision in Principle) is an indication from a mortgage lender of how much they may be willing to lend you, based on the information you’ve provided.
It’s important to remember that it’s not a mortgage offer. Think of it as the first step.
It tells you:
An AIP helps you search for properties with confidence because you have a much clearer understanding of your budget.
Did You Know?
Developers will ask whether you already have an Agreement in Principle before accepting an offer or arranging further discussions. Having one in place can help demonstrate that you’re a serious buyer.
An AIP benefits you in several ways.
It helps you understand your budget – Rather than guessing what you might be able to afford, you’ll have a clearer idea of your borrowing potential.
It can strengthen your position – When you make an offer on a property, being able to say you already have an Agreement in Principle can give developers greater confidence that you’re in a position to proceed.
It can save time later – Once you’ve found the right property, having an AIP already in place means you’ve already completed one of the first stages of the mortgage process.
What information will I usually need?
You’ll be asked for personal information such as:
We will explain exactly what’s needed and help gather the relevant information before submitting your application.
Does an Agreement in Principle affect my credit score?
This is one of the questions we’re asked most often. The answer depends on the lender. Some lenders carry out a soft credit search, which doesn’t leave a visible footprint for other lenders. Others may carry out a hard credit search, which can be visible on your credit file.
We will explain how the chosen lender approaches this before any application is submitted.
How long does it take?
In many cases, an Agreement in Principle can be arranged quickly, sometimes on the same day. However, the timescale varies depending on the lender and your individual circumstances. We will keep you updated throughout the process and let you know if any additional information is required.
How long does an Agreement in Principle last?
Most Agreements in Principle are valid for a limited period, although the exact length varies between lenders. If you haven’t found a property before it expires, don’t worry. We can help arrange a new Agreement in Principle when the time is right.
Does an Agreement in Principle guarantee a mortgage?
No. This is one of the most important things to understand. An Agreement in Principle is an indication that a lender may be prepared to lend to you based on the information available at that stage.
A full mortgage application involves additional checks, including:
Receiving an Agreement in Principle is an excellent first step, but it isn’t the final decision.
One of the biggest advantages of using a mortgage adviser is knowing which lenders may be suitable for your circumstances before an Agreement in Principle is submitted.
This can help avoid unnecessary applications and ensure you’re applying to lenders that are more likely to meet your needs.
Providing us with the documents can help us when calculating affordability. We can use many different types of income, so if you have a role where you receive income from different sources (i.e. basic salary, commission, overtime) we may be able to enhance your affordability!
✓ What an Agreement in Principle is.
✓ Why arranging one early can save time.
✓ What information you’ll usually need.
✓ That an Agreement in Principle is not the same as a Mortgage Offer.
Next Chapter
Finding the Right Home
Now that you know your budget, it’s time for the exciting part, finding your first home.
In the next section, we’ll explain what to look for during viewings, how to compare properties, the difference between freehold and leasehold, and the questions every first-time buyer should ask before making an offer.
