Mortgage Agreement in Principle: What Is It and Does It Affect Your Credit Score?

A mortgage Agreement in Principle is an initial indication of how much a lender may be prepared to lend you. It can help you understand your potential property budget before you begin making offers, but it is not a formal mortgage offer and does not guarantee that your full application will be approved.

If you are starting to think seriously about buying a home, you may also hear it described as a Mortgage in Principle or Decision in Principle. Although the name can vary between lenders, these terms usually refer to the same stage of the mortgage process.

This guide explains what a mortgage Agreement in Principle means, whether it affects your credit score, how long it lasts and what happens after you receive one.

What is a mortgage Agreement in Principle?

A mortgage Agreement in Principle is a written indication from a lender showing how much it may be willing to lend you based on the information available at that stage.

It may also be called:

• An Agreement in Principle, or AIP
• A Decision in Principle, or DIP
• A Mortgage in Principle, or MIP
• A mortgage promise

The lender will normally consider information about your income, financial commitments, credit history and intended deposit before providing a decision.

If successful, you may receive a certificate or written confirmation showing the amount the lender could potentially lend. This can give you a clearer property budget and may help demonstrate to an estate agent that you have started preparing your finances.

Is an Agreement in Principle the same as a mortgage offer?

No. An Agreement in Principle is not a mortgage offer and should not be treated as guaranteed approval.

An Agreement in Principle is usually completed before you have found the property you want to buy. It is mainly based on your personal and financial circumstances.

A formal mortgage offer can only be issued after you have submitted a full application for a particular property. The lender will then review your supporting documents, complete further affordability and credit checks and assess whether the property is suitable security for the mortgage.

The amount shown on your Agreement in Principle could change during the full application.

Does an Agreement in Principle affect your credit score?

Most lenders currently use a soft credit search when completing a mortgage Agreement in Principle.

A soft search may appear when you view your own credit record, but it is not normally visible to other lenders and does not usually affect your credit score.

However, lenders can use different processes. Before proceeding, it is important to confirm whether the lender will complete a soft or hard credit search.

A full mortgage application will normally involve a hard credit search. A hard search is visible to other lenders, and several credit applications within a short period may affect how future lenders assess you.

This is why submitting multiple Agreements in Principle or mortgage applications without a clear reason is not always helpful.

What information is needed for an Agreement in Principle?

The exact information required varies between lenders, but you will usually need to provide details including:

• Your name and date of birth
• Your recent address history
• Your employment status and income
• Your regular financial commitments
• Credit cards, loans, car finance and other borrowing
• The deposit you expect to use
• The approximate property price
• The number of people applying for the mortgage

The information must be complete and accurate. If the figures used for the Agreement in Principle do not match your supporting documents or full application, the amount available could change or the mortgage application could be declined.

You can read more about the financial information lenders may review in What Do Mortgage Lenders Look for on Bank Statements?

How much can I borrow with an Agreement in Principle?

The lender will use its own affordability calculation and lending criteria to estimate how much it may be prepared to lend.

The decision is not normally based on your salary alone. The lender may also consider:

• Your existing credit commitments
• Childcare and maintenance costs
• The number of financial dependants you have
• Your credit history
• The proposed mortgage term
• The size and source of your deposit
• The type of property you intend to buy
• Whether the mortgage payments appear affordable

Different lenders can reach different affordability figures using the same income and commitments. An Agreement in Principle from one lender does not necessarily represent the maximum amount available across the mortgage market.

For a wider explanation, read How Much Can I Borrow for a Mortgage?

How long does an Agreement in Principle last?

A mortgage Agreement in Principle will often remain valid for approximately 30 to 90 days, although the exact period depends on the lender.

If it expires before you find a suitable property, it may be possible to update or renew it. The lender may need to assess your circumstances again and could complete another credit search.

You should also review the Agreement in Principle if your income, employment, deposit, borrowing or financial commitments change before you make the full mortgage application.

When should I get an Agreement in Principle?

It can be helpful to arrange an Agreement in Principle before you begin making offers on properties.

This allows you to understand your potential budget, identify possible issues early and avoid looking at homes that may not be affordable.

An estate agent may also ask whether you have an Agreement in Principle before presenting your offer to a seller.

However, there is little value in arranging one too early if your income, deposit or circumstances are likely to change before you are ready to buy. An initial consultation can help you decide when the right time is and what preparation may be needed first.

Can I make an offer without an Agreement in Principle?

It may be possible to make an offer without an Agreement in Principle, but the estate agent may ask how you intend to fund the purchase and whether you have spoken to a mortgage adviser or lender.

Having an Agreement in Principle can demonstrate that you have taken an initial step towards arranging the mortgage. It may also help you make an offer based on a more realistic understanding of your borrowing position.

It still does not guarantee that the lender will approve the full application or accept the property.

What can change after an Agreement in Principle?

An Agreement in Principle is based on your circumstances at a particular point in time. Your borrowing position could change if:

• Your income or employment changes
• You take out new credit
• Your credit card balances increase
• You miss or make a late payment
• Your regular commitments change
• The amount or source of your deposit changes
• The property does not meet the lender’s criteria
• The property is valued below the agreed purchase price

Try to avoid making significant financial changes or taking out new credit before completing your purchase without first checking how it may affect your mortgage application.

What happens if my Agreement in Principle is declined?

A declined Agreement in Principle does not automatically mean that you cannot get a mortgage.

The decision may relate to that lender’s affordability calculation, credit scoring or individual criteria. Another lender may assess the same circumstances differently.

Before submitting another application, it is important to understand the likely reason for the decision. Repeated applications without addressing the underlying issue could make the situation more difficult, particularly if hard credit searches are involved.

A mortgage adviser can review your circumstances and help identify whether a different lender or approach may be more appropriate.

What happens after an Agreement in Principle?

Once you have an Agreement in Principle, you can continue searching for a suitable property within your potential budget.

When you have an offer accepted, the next stage is normally the full mortgage application. The lender will review your documents, complete its underwriting checks and arrange a valuation of the property.

If the lender is satisfied with you, the property and the supporting information, it may issue a formal mortgage offer.

You can follow the complete journey in The Mortgage Process Explained Step by Step

How Cariad Mortgage Solutions can help

At Cariad Mortgage Solutions, I will look at your circumstances as a whole before deciding which lender may be appropriate for an Agreement in Principle.

I will consider your income, deposit, commitments, credit history and future plans. I can explain what may be realistic, identify any preparation needed and help you understand what information the lender will assess.

If an Agreement in Principle is obtained, I will explain exactly what it means and guide you through the next steps when you find a property.

I am based at 142 Walter Road in Swansea and offer face to face, telephone and Microsoft Teams appointments to clients across South Wales and the UK.

There is no pressure, no jargon and no silly questions. The aim is to make sure you understand your position before you commit to a property.

Frequently asked questions

Does an Agreement in Principle guarantee a mortgage?

No. It is an initial indication based on the information available at that stage. A full application, supporting documents, further checks and an acceptable property valuation will still be required.

Does an Agreement in Principle affect your credit score?

Most lenders use a soft credit search for an Agreement in Principle, which does not normally affect your credit score. However, lender processes vary, so the type of search should be confirmed before proceeding.

How long does an Agreement in Principle last?

It will often remain valid for approximately 30 to 90 days, depending on the lender. If it expires, it may need to be updated or completed again.

Do I need an Agreement in Principle before viewing houses?

Not always, but having one can help you understand your potential budget. Some estate agents may ask about your financial position before arranging a viewing or presenting an offer.

Can I have more than one Agreement in Principle?

It may be possible, but submitting several unnecessarily is not always helpful. Check whether each lender will complete a soft or hard credit search and consider taking advice before making multiple applications.

Can the amount change when I make the full application?

Yes. The amount may change after the lender checks your documents, completes its full assessment and reviews the property you want to buy.

Do I need to have found a property first?

No. An Agreement in Principle is normally arranged before the full mortgage application and can help you understand your potential property budget.

Suggested reading

• How Much Can I Borrow for a Mortgage?
• What Do Mortgage Lenders Look for on Bank Statements?
• How Much Deposit Do I Need to Buy a House in Wales?
• The Mortgage Process Explained Step by Step