What is an Agreement in Principle? | AIP Mortgage Advice in Liverpool

As a mortgage broker in Liverpool, we have come across many different applicants who ask the question “what is an agreement in principle?”. We feel like people ask this question as there are a lot of different variations of an agreement in principle.

You will have heard agreement in principle, mortgage in principle and decision in principle. In fact, these are all exactly the same!

But how do they work? What is an agreement in principle? This article covers these questions and why an agreement in principle is essential during the start of your mortgage journey.

What is Agreement in Principle?

A mortgage agreement in principle or AIP is a formal agreement between the buyer and the lender stating that the buyer is able to borrow from them. This agreement is reliant on evidential documents that can back up income and affordability.

Having an agreement in principle in place also shows that you have passed a lender’s credit check. Whether they perform a hard or soft credit search is down to the lender.

Why do I need an Agreement in Principle?

An agreement in principle is needed to be able to make an offer on a property. At the point of making an offer, the estate agent will likely ask you whether or not you have one in place.

Sometimes, an agreement in principle can help you negotiate the asking price. If you are a first time buyer in Liverpool, it could be really useful to try and get the price lowered by a small amount.

If you have an agreement in principle in place, the seller will know that you are serious about your purchase and you have the funds to proceed.

Will obtaining an Agreement in Principle affect my credit score? 

Some agreements in principle can affect your credit score. This is down to the credit search that lenders carry out.

Lenders will usually opt for soft credit searches, which will mean that your credit is unaffected. However, if they choose to perform a hard credit search, if something bad appears on your file, it could adversely affect your credit score.

If nothing appears on your file, an occasional hard credit check on your file should not harm your credit. When several hard checks are made, things can start to negatively affect you.

Is an Agreement in Principle a guarantee that I will get the mortgage? 

No one will ever be guaranteed a mortgage, however, agreement in principle may be able to increase your chances of getting accepted now.

With your agreement in principle, you will need to supply documents that evidence your income and affordability. Lenders will need to see your ID, bank statements, P60, payslips and proof of deposit before accepting your application.

If you are self employed in Liverpool, you may need to supply slightly more things.

Can I make an offer without an Agreement in Principle? 

Yes, you can, however, it may take slightly longer to get approved as you have no written agreement between yourself and the lender.

How long does it take to get an Agreement in Principle? 

An agreement in principle can take as little as 24 hours to come through. As a mortgage broker in Liverpool, we are able to get this to you within 24 hours of your free mortgage appointment. It’s that easy!

How long does an Agreement in Principle last? 

Typically, your AIP will last between 30-90 days and if it expires before you proceed with a property purchase, don’t panic, it can easily be renewed! Just get in touch with one of our mortgage advisors in Liverpool.

We recommend obtaining an agreement in principle as early in the process as possible. This way, you can avoid the disappointment of being let down or declined for a mortgage.

Speak to one of our team members to get your process started and receive a free mortgage appointment online.


Last edited 29/06/2022

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