Agreement in Principle

What is an Agreement in Principle?

Basically, an Agreement in Principle is the first step to getting a mortgage. What confuses some people is that it can be called other names, such as Mortgage in Principle, a Decision in Principle or even a Mortgage Promise. Ultimately it’s an indication from a lender of how much they will potentially lend you.

What should I do if my estate agent is asking to see my Agreement in Principle? How do I get one?

If an estate agent asks you for an Agreement in Principle, you can speak to your mortgage broker to arrange one. It’s basically a certificate to show what you’re able to borrow and prove you’re a credible buyer. You can simply ask your mortgage broker to forward that on to the agent.

Do I have to have an Agreement in Principle through the estate agent I’m looking to purchase through?

No, you don’t. It’s your choice as a buyer who you choose to get your mortgage from. You can use a broker, you can go direct to a bank, or you can even try and navigate the market yourself – although this can be quite difficult.

You’re not tied to an estate agent and you certainly shouldn’t feel under pressure to go directly through them. You should be able to choose who you would like to use.

How reliable is an Agreement in Principle and how long does an Agreement in Principle last?

An Agreement in Principle gives a good picture of what you can borrow, although it is not a guarantee. Obviously the lenders still have to do other checks such as a valuation on the property and assess the case as a whole.

An Agreement in Principle is effectively a credit check based on your current circumstances. They typically last for around three months with most lenders.

Can I make an offer with an Agreement in Principle?

Yes. Normally once you have an AIP – Agreement in Principle – in place, you’re able to make offers on properties. You will also need evidence of a deposit. The estate agent will want to see a copy of your Agreement in Principle certificate and proof of that deposit.

That could be proof of savings, or a memo of sale if you’re selling an existing property. Most agents would require this to agree to take the property off the market.

Does an Agreement in Principle mean you’ll get a mortgage?

An Agreement in Principle doesn’t necessarily mean you’re going to get a mortgage. There are other factors. For example, the lender will do checks on your documents, your pay slips and your income to ensure these reflect what your application says.

The lender would also want to carry out a valuation on the property, which can also impact whether you’re able to get a mortgage.

Will I need a credit check? Does an Agreement in Principle or a Decision in Principle affect credit score?

When an Agreement in Principle is completed, it typically involves a soft or hard credit check with the lender’s credit agencies. Most lenders use a combination of three agencies – Experian, Equifax and TransUnion.

An Agreement in Principle doesn’t typically affect your credit score, as they are mainly now soft searches.

How do I apply for an Agreement in Principle and how long does this take?

It depends on how quickly your broker can move. Once you send your documents over to us here at Midas, for example, we aim to get that turned around the same day, or within 24 hours. Typically that’s how long it takes for an Agreement in Principle to be arranged.

How can a mortgage broker help here? Is there anything else we need to know?

A mortgage broker can help you arrange an AIP quickly and efficiently for you. They can also liaise with the estate agents for you to provide the Agreement in Principle and confirm the source of funds, if you’ve already provided us with these documents.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.