What is an Agreement in Principle? A Complete Guide for First-Time Buyers
Understanding an Agreement in Principle (AIP)
If you're a first-time buyer navigating the mortgage process, you may have come across the term Agreement in Principle (AIP)—also known as a Decision in Principle (DIP) or a Mortgage in Principle. But what exactly is it, and why does it matter?
An Agreement in Principle is a statement from a lender indicating how much they might be willing to lend you, based on a preliminary assessment of your finances. While it’s not a guarantee of a mortgage, it’s a crucial first step in the home-buying journey.
Why is an Agreement in Principle Important?
Getting an AIP can give you a competitive edge when house hunting. Here’s why:
- Shows You’re a Serious Buyer – Estate agents and sellers are more likely to take your offer seriously if you have an AIP in place.
- Helps Set a Budget – It gives you a realistic idea of how much you can borrow, allowing you to focus on properties within your price range.
- Speeds Up Mortgage Approval – Since the lender has already assessed some of your financial details, the full mortgage application process may be smoother and quicker.
How Do You Get an Agreement in Principle?
The process of securing an AIP is straightforward and typically involves the following steps:
- Provide Basic Financial Information – You’ll need to share details such as income, expenses, and credit history.
- Soft Credit Check – Lenders usually conduct a soft credit check (which doesn’t impact your credit score) to assess your financial stability.
- Receive Your AIP Decision – If approved, you’ll receive a document stating how much the lender is likely to lend.
Most lenders and mortgage brokers, including Quanstrom Financial, can arrange an AIP for you in a matter of hours.
Does an AIP Guarantee a Mortgage?
No—an Agreement in Principle is not a formal mortgage offer. When you proceed with a full application, the lender will conduct a more detailed assessment, including:
- A full credit check
- Verification of income and employment
- A property valuation
If any issues arise at this stage (e.g., discrepancies in income, changes in financial circumstances, or concerns about the property), the lender could revise or decline their offer.
How Long Does an Agreement in Principle Last?
Most AIPs are valid for 30 to 90 days, depending on the lender. If your home search takes longer, you may need to request a renewal.
Will an AIP Affect My Credit Score?
Typically, an AIP involves a soft credit check, which doesn’t impact your score. However, some lenders may perform a hard check, which could temporarily reduce your score. If you’re unsure, check with your mortgage advisor.
Next Steps After Getting an AIP
Once you have an Agreement in Principle, it’s time to:
- Start House Hunting – With a clear budget, you can begin viewing properties with confidence.
- Make an Offer – Sellers prefer buyers with an AIP since it shows financial credibility.
- Apply for a Mortgage – Once your offer is accepted, you’ll submit a full mortgage application with supporting documents.
Get Expert Mortgage Advice
At Quanstrom Financial, we specialize in helping first-time buyers secure the best mortgage deals. If you're ready to take the next step in your home-buying journey, contact us today for a free, no-obligation consultation.
📞 Call us on 01323 364432
📧 Email us at info@quanstromfinancial.co.uk
