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What is an Agreement in Principle?

An agreement in principle (AIP) is an indication of how much you can borrow, issued by a bank or building society. 

 An agreement in principle can sometimes be referred to as mortgage in principle, mortgage promise or decision in principle. 

You will likely need an agreement in principle to demonstrate to estate agents and sellers that you are able to get a mortgage. 

Although an agreement in principle will often provide an indication of acceptance, this is always subject to full underwriting by the chosen bank or building society.

How long does an agreement in principle last?

Agreement in principles usually vary from lender to lender, but usually they will be valid from 30 to 90 days.

Although they have an expiration date, they can typically be renewed if they expire before you have found your chosen property.  

It is important though to consider when deciding on an agreement in principle that multiple credit checks are not taking place, as this could have a negative impact on your credit rating.

What’s the difference between an agreement in principle and a mortgage offer?

A mortgage offer is an official confirmation from your chosen lender that they will give you a mortgage for your chosen property, an agreement principle on the other hand is only an early indication of acceptance and how much you may be able to borrow.

Mortgage offers will usually only be granted when the chosen lender has completed their underwriting process, this will usually include assessing all of your documents such as payslips, bank statements and finally completing a mortgage valuation on your chosen property.

Once the lender is satisfied with your documents and your new home, they will issue the mortgage offer.

Does a decision in principle affect your credit score?

When you apply for an agreement in principle, the lender will always ask for your permission to run a credit check. 

Lenders will normally complete either a soft credit check or a hard credit check. Typically, it is best in the early stages to look for an agreement in principle which will only perform a soft credit check as this will lessen any impact to your credit file as this type of credit check will be invisible to other mortgage lenders. 

A Hard credit check on the other hand will leave a footprint on your credit report multiple credit checks can have a negative impact on your credit file, this type of credit check is typically best left until you have found a property to minimise any impact to your credit score.

Looking for an agreement in principle?

Blossomfield has access to a wide range of lenders, get in touch today on 0345 066 6555 to see how we can help you obtain your agreement in principle.

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Frequently asked questions...

If I get a mortgage in principle with a lender, can I apply to a different lender if a better product comes up before my application?

Yes, a mortgage in principle will tell you whether your credit score is good enough at that specific time to allow a mortgage application, and the level of borrowing the lender may be willing to lend based on the information provided. You are not obliged to use that lender, and your mortgage broker will review this when it's time to submit a final application to ensure you are receiving the best advice.

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Can I take out a joint mortgage with a friend or family member?

Yes, you can take out a mortgage with a friend or family member. If this is something you are considering, it's a good idea to speak to a solicitor on whether an agreement (trust deed) would be a good option. A trust deed will give both of you power of sale so you are covered in the event of a dispute.

You should also discuss whether you'll be joint tenants (purchasing the property on a 50/50 basis) or whether you'll be tenants in common, with each of you owning a different share in the property, i.e., one of you will own more of the property than the other.

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How much can I borrow for my new mortgage?

How much you can borrow is down to your individual affordability, taking into account your income and outgoings. Lenders will also look at your credit score and any financial commitments you currently have. Our mortgage brokers will always advise you on the lender(s) who can offer you the most suitable and affordable mortgages.

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