Whether you hear it called an Agreement in Principle (AIP), Decision in Principle (DIP) or a Mortgage in Principle (MIP), getting one is a key event in the mortgage application process.
A lender will take a range of basic information from you to assess your affordability and perform an in-depth credit search on you. Once satisfied with these, the lender will decide on a figure that you can borrow, ‘in principle’.
Having an Agreement in Principle before you go to purchase a house will put you in favourable stead with everyone involved, particularly the estate agent, as they will be to see that you can afford to secure the mortgage that you’re going for.
However, having an Agreement in Principle doesn’t guarantee what size of mortgage a lender will offer.
After you’ve made a full mortgage application, the lender will look into your credit history and affordability in more detail which will lead to their final decision, which could be completely opposite to what the Agreement in Principle said.
If you don’t use a broker and scour the high street for different lenders, each one will seek to offer you an AIP, meaning there will be a number of credit searches on your file.
Whilst a couple probably won’t make much of a difference to your credit score, multiple searches over a short period of time will leave marks on your file which could have a negative impact.
There are some lenders that leave a soft footprint, a mark that doesn’t affect your score, but the majority will do hard searches.
Getting an AIP before you go to buy a house isn’t mandatory, so it’s worth speaking to a mortgage broker that has access to the wider panel of lenders.
For advice on getting a mortgage, or if you have any questions on getting an Agreement in Principle, speak to one of our expert advisers who will be able to help you with the next steps.