If you are just starting to think about buying a home, one of the first phrases you are likely to come across is "agreement in principle". Estate agents mention it, mortgage comparison websites push you towards getting one, and first-time buyers often spend time worrying about whether they need one before they even know what it is.
Here is a straightforward explanation.
What is an agreement in principle?
An agreement in principle, often shortened to AIP, is a written indication from a mortgage lender of how much they would be prepared to lend you, based on some basic information about your finances. You might also hear it called a mortgage in principle, a decision in principle or a DIP. These terms all refer to the same thing. Different lenders just use different names for it.
It is not a mortgage offer. It is not a guarantee. It does not mean a lender has committed to lending you anything. What it does is confirm that based on the information you have provided and an initial review of your finances, you appear to meet that lender's basic criteria and they would be prepared to lend you up to a certain amount in principle.
Think of it as a first look, not a final answer.
What does getting one involve?
Getting an agreement in principle is usually straightforward and free. Most lenders offer an online process that takes around 10 minutes. You will need to provide details of your income, your regular outgoings, any existing credit commitments, and your addresses for the last three years. Some lenders will ask for photo ID.
The lender will then run either a soft or a hard credit check. A soft check leaves no visible mark on your credit file and does not affect your credit score. A hard check does leave a footprint. Most AIP applications use soft searches, but it is worth checking before you apply.
The decision usually comes back the same day, sometimes immediately.
How long does it last?
Most agreements in principle are valid for between 30 and 90 days depending on the lender. If yours expires before you have found a property and had an offer accepted, you can usually renew it or reapply. Your circumstances will be reviewed again at that point.
Do estate agents in Didcot require one?
Most estate agents will ask to see an agreement in principle before accepting an offer on a property. Some will ask for one before they will even book you in for a viewing. This is standard practice across the market and is not specific to Didcot. It is simply their way of checking that you are a serious buyer with realistic financial backing rather than someone browsing without the means to proceed.
Given how competitive some parts of the local market are, particularly around Nobel Park and some of the villages, being able to show an AIP when you make an offer does put you in a stronger position than a buyer who does not have one yet.
What an agreement in principle does not do
This is the part that catches people out. An AIP is based on the information you provide at the time. When you make a full mortgage application, the lender does a much more detailed review. They will want documents, payslips, bank statements, tax returns if you are self-employed, and a surveyor's valuation of the property. At that stage, things can change.
Your application can still be declined at the full stage even if you have an AIP. The lender might find something in your credit history that a soft search did not surface. Your income documents might not match what you declared. The surveyor might value the property lower than the agreed purchase price. Or the lender's criteria might have changed in the time between issuing your AIP and receiving your full application.
This is one reason why an AIP from a broker, who has already done a thorough review of your situation before recommending the lender, tends to convert to a successful full application more reliably than one obtained quickly online without professional input.
Should you get one before you start viewing?
It makes sense to have one in place before you start viewing properties seriously. Knowing broadly what you can borrow shapes which properties are realistic and which are not, and it means you are ready to move quickly if you find something you want.
That said, the more valuable step is having a proper mortgage conversation first, understanding your full picture including deposit, income, any credit issues and what different lenders might offer rather than just getting a number from a website. An AIP without that context tells you a figure but not necessarily whether it is the right lender or the right product for your situation.
If you are getting ready to buy in Didcot or the surrounding area and want to get your mortgage position clear before you start viewing, we are happy to have that conversation.
Frequently Asked Questions
It depends on the type of credit check the lender uses. Most agreements in principle use a soft search, which does not appear on your credit file in a way that other lenders can see and has no impact on your credit score. Some lenders do use a hard search at this stage, which does leave a visible mark. It is worth checking which type of search a lender will run before you apply. If you are applying through a broker, they will usually be able to tell you this upfront.