A Mortgage in Principle (MIP) also known as an Agreement in Principle (AIP) or a Decision in Principle (DIP) is a written estimate from the lender, giving you an indication of what they would be willing to lend you buy way of a mortgage. It is important to remember that an AIP is a formal approach to the lender asking them to check your credit file and assess affordability.
An Agreement in Principle isn’t a mortgage offer so it does not guarantee you the mortgage. If there is information that you haven’t mentioned to the lender that negatively impacts your ability to get a mortgage, they could change their mind about whether they will lend to you, how much they would lend and what the interest rate will be.
Why get an Agreement in Principle?
AIPs can give you a better indication of the amount you could borrow – provided there is no major change in your situation when the time comes to complete your full application.
It can also be reassuring to know whether a lender is prepared to lend to you – especially if you’re concerned about your credit record.
When to get an Agreement in Principle.
If you are serious about the property that you have viewed and want to make an offer, an AIP shows you can actually afford the property you’re interested in and so gives you more credibility with estate agents and vendors. This is especially useful in competitive areas where things move really quickly – and agents appreciate knowing you’re in a position to move ahead if your offer is accepted.
Arranging an AIP also requires some effort on your part, which helps you come across as a committed and serious property hunter.
Getting an Agreement in Principle can affect your credit score
As part of getting an AIP the lender or adviser will have to run a credit check (with your consent). If the lender runs what’s known as a “hard check” it will leave a “footprint” on your credit record.
This could affect your credit rating if you apply for several of these within a short period of time. Some lenders will use a “soft credit check” for AIPs which doesn’t leave a footprint. Just check with your chosen lender which approach they use.
Checking affordability before getting an Agreement In Principle
Before you start viewing properties it’s important that you have an understanding of how much you may be able to borrow. This however, doesn’t need to be a formal agreement in principle. As whole of market FCA regulated advisers we have access to the affordability calculators used by the lenders. In addition to this we are happy to assess your Experian Credit file and give you an indication of how much you would be able to borrow. The accuracy of this is of course dependent on the accuracy of the information that you give to us.
What documentation will I need?
Lenders will want to see your last three months bank statements and payslips plus Identification and Proof of Address when you apply for a mortgage. We would request that you bring those documents to your meeting with us together with your Experian Credit report. The more that we are able to look to the actual documents relating to your income and outgoings the more accurate the information we can give to you about your borrowing. Find out more about Documentation here.