What is a mortgage approval in principle?
An Approval in Principle (AIP), is a letter from a lender showing the amount they could lend you, based on some initial checks.
It’s free to get an AIP and it’s usually valid for six months. It can be extended quite easily if your circumstances haven’t changed during that time.
An AIP is also known as:
- A Mortgage in Principle (MIP)
- A Decision in Principle (DIP)
- An Agreement in Principle (AIP)
Who is it for?
A mortgage approval in principle can be useful in a range of circumstances, for example, if you’re:
- Buying a new property
- Remortgaging your home
- Self building a property
You can find out how much deposit you’ll need in our mortgage deposits guide.
Why do you need an approval in principle?
Knowing how much you can borrow will help you to stay within budget when you either:
- Search for properties
- Plan renovation work
- Design your new home
It isn’t a guarantee of a mortgage or a particular deal at this stage, but it can help to show you’re a serious buyer and some estate agents may request to see it.
If you make an offer on a property, it’s more likely to be accepted if you have a mortgage approval in principle. This is because it shows you’re likely to be approved for a mortgage.
How to get an approval in principle
You usually need to start a mortgage application with the lender to get an approval in principle.
You can search for a mortgage using our comparison or via a mortgage broker (mortgage credit intermediary), to find the best deal.
You won’t have to produce all the documentation needed for a mortgage to get an AIP, but they’ll need to verify you, and they’ll need information about your:
- Income and spending
- Dependants
- Existing property (if you have any)
They will also run some eligibility checks. One of these includes a credit check which looks at your credit history. This is usually a ‘hard search’ which is recorded on your credit report.
Getting an AIP isn’t a lengthy process and you can sometimes apply online. You normally have a decision within 10 working days.
Ulster Bank offers an online agreement in principle service that takes 15 minutes and won’t affect your credit score. This is because they don’t carry out a credit check at this stage.
What happens if you don’t get approved?
If one lender doesn’t approve you, it doesn’t mean they all won’t, but it’s best to understand why before you try another one.
If you don’t pass the credit check
Ask your lender why, and find out which database they ran the check on, this will be either:
You can request your credit report for free on the Central Credit Register website or ICB website and if it contains something you disagree with, here are your rights.
Our guide to checking your credit record can help you to understand and improve your credit report.
Avoid reapplying for an approval in principle until the issues with your credit have been resolved.
If you’re approved for less than you need
This is likely to be because either your:
- Salary is too low
- Credit rating is poor
- Current outgoings are already high
If you have a loan for example that still has a long time to run before it’s paid off, this will affect how much you can afford to pay for your mortgage.
To improve your chances of being offered the amount you need, you could:
- Save a higher deposit
- Clear any arrears and make any loan payments on time
- Pay off or reduce an outstanding loan
- Cut down your spending
Our mortgage deposits guide shares some tips on ways to save and reduce your living costs.
What should you do next?
Not all lenders have the same lending criteria, so you could search for another lender who may approve you.
A mortgage broker (mortgage credit intermediary) can help you find lenders that are more likely to lend to you based on your circumstances.
If your credit history isn’t that good our bad credit mortgages guide shares tips and advice on how to improve your chances of getting a mortgage.
How to get a letter of offer
To convert your AIP into a formal mortgage offer you’ll need to produce various documents that prove your:
- Identity
- Earnings
- Employment type
- Outgoings
Once everything has been checked over by the lender and all their requirements have been met, you’ll be issued with a letter of offer.
This includes the full terms of the mortgage that you must check over and sign, usually within 30 days.
Next, you’ll need to arrange insurance, including mortgage protection insurance and buildings insurance.
Approval in principle FAQs
Does having an approval in principle affect my credit rating?
If you apply for an approval in principle from multiple lenders, they will each have to run a credit check - usually a hard search that shows on your credit report.
Having lots of credit checks showing on your credit report in a short space of time can have a negative impact on your credit rating.
This is because other lenders can see these checks have been made and will assume you’re struggling to get credit.
If the credit check uses a soft search, it won’t show on your credit report or affect your credit score.
Do I have to get a mortgage approval in principle?
No. Not all estate agents will request one but it can make you a more attractive buyer by having one.
If you don’t get one, you’ll still need to check how much you can borrow e.g. by using a mortgage calculator.
You can also request a copy of your credit report on the Central Credit Register website for free, to make sure there’s nothing showing that a lender might question.
