MORTGAGE GUIDANCE
A mortgage in principle is an indication of how much a lender may be prepared to lend, based on information considered at an early stage. It is also known as an agreement in principle, decision in principle, AIP, DIP or mortgage promise.
It can help you plan a property search, but it is not a mortgage offer or a guarantee that a mortgage will be approved. The lender will carry out further checks before making a formal offer.
Your home may be repossessed if you do not keep up repayments on your mortgage.
THE JOURNEY
An agreement in principle is often an early step. It can help you understand your starting point before you find a property and make a full application.
01
Work out your budget
Consider what you may be comfortable borrowing and spending each month.
02
Get an agreement in principle
Receive an initial indication from a lender or through an adviser.
03
Find a property
Use your expected budget as context while viewing suitable homes.
04
Make an offer
If you find the right property, you can make an offer through the seller or agent.
05
Submit the full mortgage application
The lender asks for more detailed information and evidence.
06
Valuation and underwriting
The lender considers your full application and the property.
07
Mortgage offer
If the lender is prepared to lend, it may issue a formal mortgage offer.
THE BASICS
A mortgage in principle is an early indication from a lender of the amount it may be prepared to lend. Different lenders use different names: agreement in principle, decision in principle, AIP, DIP and mortgage promise are commonly used terms for a similar early-stage assessment.
What it can help with
It can give you context for a property search and may help demonstrate to an estate agent or seller that you have considered your mortgage position.
What it does not mean
It is not a mortgage offer, does not guarantee a full mortgage will be approved, and does not confirm that a particular property will meet the lender’s requirements.
A full application involves further checks
Before issuing a formal mortgage offer, the lender will normally assess your full circumstances, supporting documents and the property. The outcome may differ from the earlier indication.
GETTING READY
The exact questions and checks vary between lenders. An agreement in principle usually uses the information available at that stage, so it helps to have an accurate picture of your finances and plans.
Your finances
Your income, regular spending, existing borrowing and the amount you plan to contribute as a deposit may all be relevant.
Your deposit
Knowing the size and source of your deposit can help you prepare for the questions a lender may ask later in the application.
Your plans
You may want to think about the property price range, the kind of mortgage you are considering and your wider moving costs.
WHAT TO EXPECT
A lender or adviser uses the information you provide to make an initial assessment. Some lenders may carry out a soft credit search, while others may use a hard search, so it is sensible to check what type of search will be used before you proceed.
How long does it take and how long does it last?
Some decisions are available quickly once the required information is supplied. Their validity period can vary by lender, so check the date and any conditions that apply.
How accurate is it?
It reflects information considered at an early stage. The lender may reach a different decision after reviewing evidence, the full application and the property.
Do you need one before viewing or making an offer?
Not always, but an estate agent or seller may ask whether you have considered your mortgage position before progressing an offer.
Can you get more than one agreement in principle?
You may be able to approach more than one lender, but consider the type of credit search each will use and avoid making decisions based on a single early indication.
COMMON QUESTIONS
A few practical questions that often come up when you are preparing to buy a property.
Does getting a mortgage in principle affect my credit score?
Can a mortgage still be declined after an agreement in principle?
What should I do after receiving one?
Is a mortgage in principle the same as a mortgage offer?
CONTINUE EXPLORING
Understand the mortgage process, from deposit and affordability to making an offer.
Explore clear guides to the mortgage decisions that can matter while buying or remortgaging.
READY TO TALK TO AN ADVISER?
MortgageAdvice.co.uk can introduce you to a selected adviser who can discuss your circumstances and provide regulated mortgage advice.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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