An Agreement in Principle (AIP), sometimes called a mortgage in principle or decision in principle, is an early indication from a lender of how much they may be willing to lend you. It is often considered the first stage of mortgage approval, giving buyers an idea of their potential borrowing before submitting a full mortgage application.
To provide an Agreement in Principle, a lender will review some basic information about your circumstances. This usually includes your income, financial commitments and credit history. In many cases, the lender will also carry out a credit check to assess your borrowing profile.
Although an Agreement in Principle is not a formal mortgage offer, it provides a useful indication of how much you may be able to borrow. This can help you understand your budget before beginning your property search.
Many buyers obtain an Agreement in Principle early in the home-buying process so they can approach estate agents and sellers with greater confidence.
Different Names for an Agreement in Principle
Different lenders sometimes use slightly different terms for an Agreement in Principle.
You may hear it referred to as:
- Mortgage in Principle
- Decision in Principle (DIP)
- Mortgage Promise
These terms generally refer to the same stage of the mortgage process, an early indication from a lender of how much they may be willing to lend based on your initial financial information.
Why is an Agreement in Principle Important?
Obtaining an Agreement in Principle can make the property search process much easier.
Estate agents and sellers often prefer buyers who already have an Agreement in Principle because it shows that a lender has reviewed the buyer’s financial position.
Having an AIP can therefore help demonstrate that you are a serious buyer and that you may be able to obtain a mortgage for the property you wish to purchase.
In some cases, estate agents may ask to see an Agreement in Principle before arranging viewings or accepting an offer on a property.
What Information is Needed for an Agreement in Principle?
To obtain an Agreement in Principle, lenders will usually ask for some basic information about your financial situation.
This may include:
• your income and employment details
• existing financial commitments such as loans or credit cards
• your estimated property purchase price
• your available deposit
• your credit history
Some lenders may carry out a soft credit check, while others may perform a hard credit search when issuing an Agreement in Principle.
Do You Need a Mortgage Adviser to Obtain an Agreement in Principle?
It is possible to obtain an Agreement in Principle directly from some lenders online. However, many buyers choose to arrange this through a mortgage adviser first.
An adviser can help identify lenders that are more likely to support your circumstances and avoid unnecessary credit checks with unsuitable lenders. This can make the process smoother and help ensure the Agreement in Principle is based on a lender that may be suitable when you proceed to a full mortgage application.
Does an Agreement in Principle Guarantee a Mortgage?
No. An Agreement in Principle does not guarantee that a mortgage will be approved.
It is simply an indication from a lender that they may be willing to lend a certain amount based on the initial information provided.
A full mortgage offer will only be issued after the lender has completed a full mortgage application, reviewed supporting documents and carried out a property valuation.
How Long Does an Agreement in Principle Last?
An Agreement in Principle usually remains valid for 60 to 90 days, although this can vary depending on the lender.
If you do not find a property within that time, the Agreement in Principle can normally be refreshed or updated.
When Should You Get an Agreement in Principle?
Many first time buyers choose to obtain an Agreement in Principle before beginning their property search so they understand what they may be able to borrow.
An Agreement in Principle allows you to:
- understand your likely borrowing limit
- focus on properties within your budget
- demonstrate to estate agents that you are ready to proceed
Obtaining an Agreement in Principle early can make the home buying process smoother and help avoid delays once you find a suitable property.
Moving From an Agreement in Principle to a Full Mortgage Application
Once you have found a property you would like to purchase, the next step is to submit a full mortgage application.
At this stage the lender will request supporting documents such as:
- proof of identity
- proof of address
- income verification
- bank statements
The lender will then review your application in more detail and arrange a property valuation before deciding whether to issue a formal mortgage offer.
You can also read our guide explaining how the mortgage application process works in the UK to understand the full journey from enquiry to completion.
Speak With a Mortgage Adviser
If you are planning to buy a property and would like to obtain an Agreement in Principle, the team at Mortgage Advice Center can help.
Our advisers review your circumstances and search across a wide range of lenders to identify suitable mortgage options. We can then arrange an Agreement in Principle and guide you through the next stages of the mortgage process.
If you would like to discuss your situation, you can contact our team to arrange a telephone or meeting with a mortgage adviser.
