Mortgage agreement in principle
A mortgage in principle (MIP), also known as an agreement in principle (AIP) or decision in principle (DIP), is an estimate of how much you may be able to borrow for a mortgage. Getting a MIP is usually the first step you’ll take before searching for a property or a new mortgage deal.
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What is an agreement in principle?
An agreement in principle (AIP) is a document from a mortgage lender indicating how much they would be willing to lend, assuming you meet their full criteria when you apply.
An agreement in principle is not a formal mortgage offer. But having one gives you a clearer idea of your borrowing power and can strengthen your position as a prospective homebuyer.
Once you're ready to apply for a mortgage, you're not obligated to proceed with the same lender. You can still change your mind if you find a better deal elsewhere once you’re ready to apply.
The difference between a mortgage in principle and an agreement in principle
Both a mortgage in principle and agreement in principle give you a good idea of how much you might be able to borrow but there are some key differences:
Mortgage in Principle (MIP) – Typically provided by a mortgage broker, comparing your eligibility and affordability across multiple lenders to estimate your maximum borrowing potential.
Agreement in Principle (AIP) – Provided by an individual lender, giving you a tailored borrowing estimate based on their specific criteria.
If you’re looking for a mortgage in principle comparison across a wider selection of lenders, a MIP from a broker could be a good option for you.
Why get an agreement in principle?
Getting a mortgage agreement in principle offers several advantages that can make the homebuying process feel much more straightforward.
Define your budget. An AIP provides an indication of your borrowing potential. This allows you to focus your search on properties that are realistically affordable.
Strengthen your buying position. Presenting an AIP shows both estate agents and sellers that you're a serious, credible buyer. This can speed up the viewing process as some agents require you to have an AIP before arranging viewings. And, in a competitive market, it could even work in your favour during negotiations.
No impact on your credit score. Most lenders perform a soft credit check to issue an agreement in principle. This allows you to check your borrowing potential without negatively impacting your credit score.
When should I get a mortgage agreement in principle?
It's a good idea to get an agreement in principle at the very beginning of your home buying journey. Getting an AIP before you start looking at properties establishes your budget and saves you the disappointment of viewing homes that are out of your financial reach.
Furthermore, having an AIP in place early can prevent delays. Many estate agents now require proof of an agreement in principle before they will arrange property viewings, so it's a good idea to have one ready.
What's the difference between a mortgage agreement in principle and a mortgage offer?
You'll get a mortgage agreement in principle and a formal mortgage offer at two very different stages of the home buying process.
A mortgage agreement in principle is an estimate of what you could borrow, which is not guaranteed until you go through the full mortgage application process and receive a formal mortgage offer. Only once you receive an official mortgage offer can you proceed to completion.
| Agreement in Principle (AIP) | Mortgage offer | |
|---|---|---|
| What is it? | An initial estimate of how much you could borrow | Confirmation from your lender that they will lend you a specific amount of money needed to purchase a property |
| When do you get it? | At the start of your property search | After your offer on a specific property has been accepted and you have submitted a full mortgage application |
| Why do I need one? | To get an idea of your budget and show sellers you're a financially prepared buyer | To secure the funds you need to legally complete your property purchase |
| How is the lender decision made? | Based on financial information provided, such as income and expenditure, and a soft credit check | Based on a full application, hard credit check, supporting documents, underwriting and a property valuation |
| Type of credit check used? | Usually a soft credit check, which has no impact on your score | A hard credit check, which is recorded on your credit file |
| It it a guarantee? | No - an AIP is not a guarantee you'll be accepted for a mortgage | Yes, it's a guaranteed mortgage offer (provided all conditions are met) |
What information do I need to get a mortgage agreement in principle?
To get the best mortgage in principle that takes into account your personal circumstances, you’ll need to supply most of the information you’d need to make a full application. This reduces the risk of any nasty shocks when the lender processes your formal mortgage application.
If you’re applying jointly with others, ensure you have these details for all applicants too!
Personal identification - name, date of birth, passport or similar official identification
Income details - payslips (at least 3 months for employees) or tax calculations (typically 2-3 years for self-employed applicants)
Address details - full address history to cover the last three years, with proof if possible. This will be requested at application stage so it’s worthwhile having it to hand
Details of outgoings - If possible you should provide bank statements, as these will be requested at application stage. If not, a full list of your current outgoings and financial commitments, including debt repayments will be needed
Credit report - Though your broker or lender will usually just run a soft credit check at the MIP stage, it's unlikely you'll get a mortgage without a full credit check. So it's a good idea to be aware of what's on yours before you apply! You can obtain a copy of your credit report for free from a number of credit referencing agencies, such as Experian
A mortgage agreement in principle can be particularly useful for first-time buyers. Knowing roughly how much you could afford to borrow can be a big help when you first start searching for properties! ”Laura Hamilton, Mortgage Expert
Does an AIP affect your credit score?
In most cases, securing an agreement in principle will not negatively affect your credit score. Most lenders use a soft credit check to provide an AIP. A soft credit check is a top-level review of your credit history that is not visible to other lenders and has no impact on your score. If you’re concerned, ask your mortgage broker or lender whether they will do a full credit search or not.
Lenders typically reserve the hard credit check, which is recorded on your credit file, for when you submit a formal mortgage application. However, being transparent about any credit issues at the AIP stage can help prevent delays or disappointment when you apply for your mortgage in full.
How long does an agreement in principle last?
Once you have the agreement in principle it will typically remain valid for 30 to 90 days - depending on the lender. This is the time frame in which you'll need to view properties and have an offer accepted on your chosen home.
Keep in mind that if you need to apply for a new AIP because it’s taking longer than anticipated to find a suitable property, the amount you could borrow may change, even if your personal circumstances haven’t. This is because changes to the Bank of England base rate and other industry factors, such as property values, can impact the amount of money lenders are willing to offer at any time.
Does an agreement in principle guarantee a mortgage offer?
No it doesn’t, it’s simply a preliminary agreement, assuming you meet the lender criteria once they’ve assessed your supporting documents and conducted the credit check on application.
There are multiple benefits to securing a decision in principle, however and as you’re not bound by an AIP you won't have to miss out on a better deal if you find one later in your search.
Can I get more than one agreement in principle?
Yes it’s possible to get them from a number of lenders to compare which one would potentially offer you the best terms.
However, filling out multiple different applications to find the best AIP for you can be time-consuming. It’s usually quicker to go to a broker who can compare your options for you and help you choose the most suitable lender before you apply.
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Tell Mojo a bit about you and the property you’re looking for to get your expert-endorsed MIP, usually within 24 hours.
What happens after getting a mortgage agreement in principle?
So you've got your AIP and have a rough idea of how much you can borrow... but what happens next?
Start your house hunt - With your AIP in hand and a budget in mind, look for your new home and put an offer in
Find your mortgage - Share details of the property with your mortgage broker, who'll help you compare mortgage deals
Start the mortgage application process - Once you've found the right mortgage for you, submit a formal application
Get a property valuation - Your lender will want to confirm your property is worth what you're paying for it
Receive your mortgage offer - This confirms your lender is happy to lend you the money you need to buy the property
Complete your house purchase - Your conveyancer or solicitor will handle the legal aspects. Once you've exchanged contracts and completed, you'll be able to move into your new home
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Mortgage agreement in principle FAQs
How long does it take to get a mortgage in principle?
An agreement in principle can sometimes be prepared in less than an hour, but this can take a little longer if you don’t have the necessary paperwork ready, or any issues are highlighted.
Why would a mortgage agreement in principle be declined?
If a lender can see from your initial information that you are unlikely to meet some of their criteria or pass a credit check, it’s unlikely that they will issue an agreement in principle.
This is a good indication that you are possibly not yet mortgage ready. It might be best to speak to a mortgage broker, who can help you to prepare for a successful application.
Why might a mortgage offer differ from your agreement in principle?
There are a number of reasons your mortgage offer might differ from your agreement or decision in principle, including, but not limited to:
Your financial circumstances have changed since you applied for the AIP
Your credit file reveals information that changes how risky the lender considers your application
The lender’s valuation of your property is more or less than your AIP reflects
Market changes - such as when the mini-budget in Autumn 2022 led to lenders restricting their LTVs and tightening their criteria generally
The best way to avoid this is to move quickly when you have an AIP in place. It’s not always possible to find your perfect home quickly, of course, so you may need to get a new AIP before you continue your search if your old one expires.
Can I get an agreement in principle without a credit check?
Most brokers or lenders will run a credit check when you apply for a mortgage decision in principle, though they usually opt for a soft credit check which has no impact on your credit score.
If you’re looking for a very general idea of how much you might be able to borrow without a credit check, a mortgage affordability calculator could be a good option. It’ll give you a rough estimate based on your income and deposit size.
Do remember that a hard credit check will always be conducted once you submit a formal mortgage application, though. If you’re concerned your credit history might hold you back, it’s best to speak to a specialist broker who will be able to look into your options.
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