Your guide to a mortgage in principle
An agreement in principle, shortened to an AIP, is an agreement which sometimes comes in certificate form from a mortgage lender that says, in principle, based on what you have told them regarding your financial situation and amount of deposit you have, they would be happy to lend to you and offer you a mortgage. This is the piece of the house buying puzzle that can prove to be essential when putting an offer in on a house for estate agents and vendors to see that you are serious about wanting to buy the property.
An agreement in principle doesn’t mean that the lender will definitely offer you a mortgage after a full credit check as more detailed questions will need to be asked for an official application. Plus, the application will also be subject to a satisfactory mortgage valuation of the property you are buying and a review of your income and expenditure to assess your ability to repay the loan.
An AIP (agreement in principle), a DIP (decision in principle) and a MIP (mortgage in principle) are all the same document that we have mentioned above. Different mortgage lenders and estate agents will use the term that they prefer but they are the same thing and can be all used interchangeably.
You can attain an MIP, AIP or DIP from your chosen lender if you have already decided to go with a specific bank or building society. Or, you can speak to a mortgage adviser or broker such as Nottingham Mortgage Services and they can find options from over 60 lenders who may be willing to give you a decision in principle.
A mortgage in principle will usually last between 30 and 90 days. You may be able to reapply for your MIP if your current one expires before you need it but this may affect your credit score if too many applications are put in.
If anything changes during that time then it could be best to re-do your mortgage in principle to make sure that you aren’t disappointed when it comes to applying officially for the mortgage from your chosen lender.
To apply for an agreement in principle you can usually do this online, on the phone or at a branch if you are opting for a high street lender. You can call Nottingham Mortgage Services on 0344 481 0013 to enquire which lenders may be able to offer you an agreement in principle and send it to you via email.
You will have to provide your personal information such as;
- Name
- Date of birth
- Address
- How much you earn and what size deposit you have
- Information about your usual expenditure and existing credit agreements
- You will then need more in depth information to actually make the mortgage application for proof of income such as company accounts if you are self-employed or pay slips if you are an employee.
You should attain an agreement in principle when you are ready to start looking at houses that you want to view and potentially make offers on. The AIP is something that potential vendors will be interested to see that you have organised and it will mean to them that you are ready to move forward with the purchase without delay.
Applying for a mortgage in principle will require running a credit check but it can either be “hard” or soft”. Ask the lender or your mortgage adviser which one it will be as a hard check will leave a footprint on your credit file which could affect your rating in the future if your application gets declined. A soft credit check doesn’t appear on your credit file in the future.
You technically can put an offer on a house without a mortgage in principle but there’s no guarantee that a vendor will accept your offer. They may reject your offer as you will then need to get your mortgage in principle which is going take time and you are not guaranteed to get one. A vendor may be reluctant to accept an offer without an MIP due to this added delay and an estate agent may not even put forward your offer to them.
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