Agreement in Principle
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Agreement in Principle
Paul explains an Agreement in Principle and why they are an important step in the home buying process.
What is an Agreement in Principle (AIP)?
An Agreement in Principle is called many different things. It’s also known as a Decision in Principle (DIP), or a Mortgage Promise or Approval in Principle. They’re all the same thing.
Basically, they’re not a promise that an applicant will get a mortgage, as this would be fully assessed by an underwriter on full mortgage application when you actually find a property.
An AIP or DIP is something that we will do after checking affordability. It is a document that a lender would give to you saying that a certain amount of borrowing is achievable. Initially, we would ask about any credit issues, as that may affect the amount that you could borrow on a mortgage.
What should I do if my estate agent is asking to see my Agreement in Principle? How do I get one?
Contact us here at Brick 2 Brick – we’ll assess your income and commitments and any dependents that you have. Then we’ll be able to help you out with an Agreement in Principle, once we’ve found out what that maximum borrowing amount will be.
Do I have to have an Agreement in Principle through the estate agent I’m looking to purchase through?
No, you don’t. We could get one of those for you. Some agents could be a bit pushy in getting you to use multiple services, but nothing is compulsory.
We’ll be able to do the Agreement in Principle for you and that should be sufficient.
How reliable is an Agreement in Principle and how long does one of these last?
They are pretty reliable as long as we’ve got the right information from the client. If we have correct details and there are no issues on your credit file, we are pretty certain that the lender will be able to give you that amount.
With some lenders, the Agreement in Principle will last 30 days, with some it’s 60, and a couple will go to 90 days.
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Can I make an offer with an Agreement in Principle?
Some estate agents do need one of those before putting your offer forward, while others won’t ask for one. With an Agreement in Principle, it means you’re putting forward a solid offer, and it could give you more power over somebody that hasn’t got one.
Does an AIP or an Agreement in Principle mean you’ll get a mortgage?
It doesn’t mean you’ll get a mortgage. That would be fully assessed by the underwriter on the full application. An AIP is just something we’ll do after checking the affordability, to confirm that a certain amount is achievable.
Will I need a credit check and does an Agreement in Principle affect my credit score?
You would need a credit check, but a Decision in Principle would not affect your credit score.For a credit check, we use a company that looks at three different credit agencies, the ones that all the lenders tend to look at. Each lender looks at different agencies.
If you tell me that you haven’t got any credit issues, so there are no missed payments or late payments on your file, you won’t need one of those credit checks – as long as that’s correct information.
But if you think there may be certain blips on the credit file or you’re unsure about what’s on there, I will need to see that file. I need the correct information to be able to help you.
A Decision in Principle doesn’t really affect the credit score because it’s a soft search, which will show on the credit file for you to see, but lenders won’t be able to see that.
How do I apply for an Agreement in Principle and how long does it take?
Come to us and we’ll be able to sort everything out for you in-house. It should just take around 30 minutes.
What else do we need to know about getting an Agreement in Principle?
It just involves a free initial consultation. We look at the whole picture to ascertain what the maximum amount is you’ll be able to borrow. That’ll enable you to know what value properties to start looking for.
We’ll get the Agreement in Principle ready for when you do find a property and put an offer in. When that’s accepted, we’ll find the most suitable deal for you and then process the mortgage application.
Hopefully it will all go as smoothly as possible through to completion day – the day that you move in.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
