Agreement in Principle
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Agreement in Principle
Luke Platt explains how an Agreement in Principle works and why it’s an important part of the mortgage process.
What is an Agreement in Principle?
An Agreement in Principle is a document issued by the lender, after doing a sense check of your affordability, your credit commitments and your credit history. They check whether there are any negative factors or if it’s all positive.
An Agreement in Principle is also known as an AIP, a Decision in Principle (DIP) or a Mortgage in Principle (MIP) – they are all the same thing. It’s a document given to you by the lender to say they have looked at your incomes and outgoings, stating how much they believe they can lend to you.
Obviously a broker can help you with this. We look at your credit report and see which lenders will potentially lend the maximum possible. So get in touch with us at Smiths Financial Solutions and we’ll help you.
What should I do if my estate agent is asking to see my Agreement in Principle? How do I get one?
Speak with us first before seeing any estate agent. We will help you work out what your budget is and look to get an Agreement in Principle in place.
We also look at your conveyancing needs – the solicitors. Then that way, when you do go to the estate agent, you will be what‘s known in the industry as a hot buyer. You will stand out to the estate agent and the vendor, as you’re ready to make an offer on a property.
If you’re unsure as to how to approach the estate agent or put an offer in, we can also liaise with them on your behalf – we’re here to support you.
Do I have to have an Agreement in Principle through the estate agent I’m looking to purchase through?
Not at all. You’re entitled to use whichever mortgage broker you want to. However, I would recommend you contact us at Smiths Financial, as we’ll help and support you with your estate agent, through to completion
Some estate agents don’t have a service in place to get you an Agreement in Principle. It’s worth checking that out and using a broker to get that done for you.
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How reliable is an Agreement in Principle and how long does an AIP last?
An Agreement in Principle is a sense check on your income and outgoings, as well as your credit history. At Smiths Financial we can see which lender may be suitable for your needs and requirements.
How long an AIP lasts will depend on the lender. It can be from 30 days up to 90 days.
It can always be extended or resubmitted if required. For example, you might see a property you like but you’re not successful in obtaining it – then you might find another property for a different value. We can extend or resubmit that AIP if required.
Can I make an offer with an Agreement in Principle?
Yes, you can make an offer on a property with an Agreement in Principle. In fact, most people that own a home you want to buy – the vendor – will request that you have an Agreement in place. It gives them peace of mind that you’re ready to proceed and you’ve done your financial checks.
Again, you can speak with us here at Smiths Financial and we’ll talk you through the offer process and discuss the next steps.
Does an AIP or Agreement in Principle mean you’ll get a mortgage?
Not always, because the lender will want to do additional checks. That might be regarding your employment – especially if you’re newly employed, or your residency status, credit record, your deposit and so on.
There are lots of variables when it comes to getting a mortgage and by speaking with us here at Smiths Financial, you’ll have a broker there guiding you all the way through to achieve your dream of home ownership.
Will I need a credit check? Does a Decision in Principle (DIP) affect credit score?
Yes. An Agreement in Principle is a credit check. The majority of lenders carry out a soft credit check rather than a hard check, which is important as a soft search does not affect your credit score, whereas a hard search will.
Generally though, a hard search is only carried out when a full application is submitted.
How do I apply for an AIP and how long does this take?
The right way to do this would be through speaking with a broker. Here at Smiths Financial, we carry out a fact-find, going through your income, personal details, deposit and your needs and requirements for the mortgage. In the Fact Find, we will talk about the property value, the length of the mortgage term required, and whether you want a fixed, tracker or discounted product, as there are lots of different variables to explore and discuss.
In terms of how long it takes, from start to finish, getting an Agreement in Principle in placemight take just a couple of hours. However, if more research is required, it can take longer. It all depends on the criteria with the lenders.
What else do we need to know about an Agreement in Principle?
We can help you through the whole process – working out your affordability; helping you look for property based on your budget, and assisting with putting an offer forward to the estate agent for you.
We can also help with any conveyancing needs, or we can liaise with the housing association if you’re looking at a shared ownership purchase. Really, there isn’t a lot that we don’t do.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
