Agreement in Principle

Podcast approved by The Openwork Partnership on 23/04/2025.

When should I get an Agreement in Principle?

An Agreement in Principle is best done at the beginning, before you start actively looking at properties. It just shows that you’re a serious buyer. You can demonstrate to sellers and estate agents that you’re capable of securing a mortgage.

Also, it helps you budget and gives you a bit of direction for looking at properties. You don’t want to waste time looking at properties outside your budget. It can give you a bit more of an edge, as well. Usually sellers will want to work with somebody that’s got an Agreement in Principle.

What information do I need to get an Agreement in Principle?

Quite basic documents – we need ID documents or a passport, driving licence, income documents such as pay slips, or your tax returns if you’re self-employed. Then, we need bank statements that show income and expenditure.

From that we’ll be able to get a good idea of the situation and will get a credit check done. Credit reports are also quite important, because then we’re able to match everything up. You might have forgotten about a loan or something small on the side that could affect the Decision in Principle. By having a credit report, it will be accurate.

How is affordability calculated for an Agreement in Principle?

Lenders will, first of all, look at your income – whether that’s regular, salaried pay or from self-employment. Some can also look at additional income from bonuses, commission or overtime to increase the amount that you can borrow.

They might also accept things like benefit income, as well. A lot of clients that we speak to have children and sometimes Child Benefit can be used to boost how much you can borrow.

In terms of commitments, lenders want to understand things like personal loans, credit card payments, car finance and student loans. They might also look at your general living expenses, although this does vary from lender to lender. If you have children, they may include childcare costs, school or nursery fees.

Is an Agreement in Principle guaranteed? Can my mortgage be declined after an Agreement in Principle?

It’s not guaranteed – it’s more of an indication. You can still be declined when the mortgage is put through as a full application. At that point it’s passed over to an underwriter who will assess the documents and look at it in more depth.

An Agreement in Principle is more automated and based on your credit file. But things can change once an underwriter actually has a look at the documents. They may ask for more documents and more information, and based on our replies, that could change the outcome.

Can I get an Agreement in Principle if I’m a First Time Buyer?

Yes, of course. An Agreement in Principles is available to everyone.

How will bad credit affect an Agreement in Principle?

With bad credit there’s probably a higher likelihood of being rejected. Some lenders might not be able to accept that. It’s dependent on the scenario and how bad the credit is.

They all have different criteria. Some lenders might accept, while others might have a stricter policy around it. You might be offered a lower loan amount, or a higher interest rate, depending on how bad the credit is and the specific scenario. It differs from client to client.

Is it harder to get an Agreement in Principle if I’m self-employed?

No. It’s assessed in the same way as for someone with a salaried income. The key difference is the documentation that a self-employed applicant needs to provide.

That might include your tax calculations, company accounts and business bank statements. The documentation will just help the mortgage broker assess your earnings. It will also help them determine what you can afford to borrow.

I’ve been declined an Agreement in Principle. What can I do?

There could be various reasons for the decline. Firstly, find out the reason by looking at your credit file – the cause might be on that.

There could be incorrect information on your file that can be updated – and that will obviously change the outcome. If you can’t go ahead with that lender based on the information on your credit file, you could try with others.

We can give you clarity around the reason why, depending on the amount of information we can get from the lender. It always varies case by case.

What are the benefits of getting an Agreement in Principle (AIP) with a mortgage broker?

There are many different benefits. The first thing is that mortgage brokers have access to a wide variety of different lenders – high street banks, specialist lenders, or even lenders that specifically cater for self-employed applicants or individuals with poor credit.

On some occasions, brokers get access to exclusive deals that are not available through the normal channels. You also get access to expert advice and guidance. We assess your personal situation to recommend a mortgage that’s suitable for your circumstances. We can help with complex scenarios – an individual with poor credit history, for example.

We can find you a lender that will be a bit more flexible and accept your circumstances. You’ll tend to get a better success rate, as well. That’s because a mortgage broker will get to know you and understands the lender’s criteria.

Your application is more likely to be approved through a broker rather than approaching multiple lenders yourself – and then getting knocked back. It’s just better to get somebody with the right expertise to manage it for you.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Podcast approved by The Openwork Partnership on 23/04/2025.