What is a Mortgage Agreement In Principle (AIP)?

What is a Mortgage Agreement In Principle (AIP)?

What is a Mortgage Agreement In Principle (AIP)?

An agreement in principle (AIP), also known as a ‘decision in principle’ (DIP), a ‘mortgage in principle’ or ‘mortgage promise’ is written confirmation from a lender, normally in the form of a certificate or statement which says that, ‘in principle’, they would lend you a certain amount.

On applying for an AIP the lender will run a credit check and review your credit file to establish whether you are eligible to borrow from them.  They will use this information to ascertain if they are happy to lend the amount you need.

Once you have had an offer accepted on a property, the AIP is then used as a basis for a full mortgage application.  In order to get that, you’ll need to go through the full application process which can be done by your broker.

When should I get a Decision In Principle?

Although you don’t have to get an agreement in principle when looking for a new mortgage, it is often recommended as can help when you are looking to buy a property.

Estate agents will often ask to see a copy of your AIP before or when you submit an offer on a property so that they know you have your finances sorted and will be able to get a mortgage on any property that you ware looking to buy.

Get a Mortgage Agreement In Principle

How do I get an Agreement In Principle?

Dan The Mortgage Man is well placed to get an Agreement In Principle for you.  Generally, you’ll be asked to provide some basic information such as your name, date of birth, current address as well as details of your income and expenditure.

You may also be asked to provide a copy of your credit report which you can get for free at Check My File.

Why should I get an Agreement In Principle?

An Agreement In Principle allows you to find out how much you will be able to borrow from a lender.  It also gives added assurance if you have a limited credit history or have had credit problems in the past.

Bear in mind, though, that a decision in principle is not a guarantee, merely an indication of what a lender may offer. When you go through the full application process, lenders will look to underwrite the mortgage and will look at your income, expenditure and credit history in more detail.

Once they have assessed this, they may decide to lend you less than the figure in your decision in principle or even take the decision not to lend to you at all at this point.

Thankfully, using a mortgage broker can prevent this as they will discuss your needs fully with you before running a DIP and will only approach lenders who they feel will be happy to lend to you when they review your paperwork.

Lastly, it’s worth remembering that just because you have an Agreement In Principle with a lender that was best for you one day, this may have changed by the time you are ready to make a full mortgage application.

At Dan The Mortgage Man, we always double-check on the day that you make your application that you are still applying to the best lender for your needs.  If not, we will obtain a new AIP for you with the best lender.

To speak to someone about getting an Agreement In Principle, contact us today!

Contact Dan The Mortgage Man

Wirral Office: 0151 792 6501
Mobile: 07837 820 894

or contact us online by clicking here.