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An agreement in principle, also known as a 'decision in principle', a 'mortgage promise' or a 'mortgage in principle', is a certificate or statement from a lender to say that, 'in principle', they would lend you a certain amount.
When you apply for an AIP the lender will check your credit file to establish whether you're eligible to borrow from them and if they are happy to lend the amount you need.
You don't have to get an agreement in principle, but it can sometimes help when you're house-hunting.
It's important to remember that an agreement in principle is not a mortgage offer or an official confirmation that you have a mortgage. To get that, you'll need to go through the full application process.
In this guide, we explain how to get an AIP and the best time to get one.
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To get an agreement in principle, you'll either need to approach a mortgage lender directly or go via a mortgage broker.
A mortgage broker can help save time by suggesting the best lenders and deals to go for to suit your specific circumstances.
But if you are keen to do the research yourself, Which? can help.
We've surveyed thousands of mortgage holders to find out how satisfied they are with their provider and find the best mortgage lenders. We asked them to rate their lender on a range of measures, from the application process to the ease of managing their mortgage online and overall customer service.
Plus, we regularly round up the best mortgage rates on the market for first-time buyers so you can get a sense of which lenders tend to offer the best deals. Just bear in mind that rates may be different by the time you're ready to buy a house.
You won't need to go through the full application process to get an agreement in principle. This will come later, when you've had an offer on a property accepted.
Even though it's not a full mortgage application, you will still need to provide information to get an agreement in principle.
Generally, you'll be asked to provide:
At this stage, you can just provide the information alone without supporting documents. But you will need those when you make your full mortgage application.
Estate agents will often want to ensure that you will be able to get a mortgage on a property before you put in an offer, so it can be helpful to have an agreement by this point.
Make sure you've taken advice on products and lenders before you proceed with an agreement in principle, as getting one can leave a soft or hard footprint on your credit file.
If you are remortgaging, there is less of a need for this information, so you would submit an agreement in principle once you've chosen a lender and product.
Having a decision in principle shows that you can, in theory, afford to buy a property. This could make you a more attractive buyer and set you apart from other prospective buyers.
The size of your agreement in principle can be a helpful indicator of how much you'll be able to borrow. You can use this to search for a property in your price range.
If you have had credit problems in the past, or if you have a limited credit history and aren't sure what a bank or building society might lend to you, an agreement in principle could give you added reassurance around your borrowing prospects.
A decision in principle is not a guarantee. When you go through the full application process, the lender will look at your earnings and credit history in more detail. They may decide not to lend to you at this point.
Most lenders will run a 'hard' credit search before offering you an agreement in principle, which will leave a mark on your credit file.
This shouldn't be too problematic if you only apply for one or two AIPs. However, having several credit application searches on your file in a short period of time can serve as a red flag to anyone who might be deciding whether to lend to you in the future.
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