Agreement in Principle: What can go wrong?

What is an Agreement in Principle?

An Agreement in Principle (AIP), also known as a Decision in Principle, is a document you get from the lender you want to get a mortgage from, confirming what you could be offered for a mortgage. The amount shown on your Agreement in Principle is not a guarantee of what you will be offered, however, as you will still need to go through the full mortgage application, which includes eligibility and affordability checks.

Is an Agreement in Principle a good sign?

If you’ve been given an Agreement In Principle, this is a good sign — even if it’s not a guarantee and nothing’s set in stone just yet. It’s still something to celebrate!

Even if things don’t work out and your Agreement In Principle application falls through, you’ll have plenty of other opportunities to buy, especially if you have a mortgage broker at your side. 

Does an Agreement in Principle guarantee a mortgage?

No, an Agreement in Principle is an indication, not a guarantee. You could still be declined later if:

• Your income, debts or job status change
• The lender changes their affordability criteria
• The property doesn’t pass valuation or survey checks
• You provided incorrect or incomplete details

That said, if your finances and circumstances stay the same, your AIP is generally very reliable.

Learn more: What can stop you from getting a mortgage?

How likely are you to get a mortgage after an Agreement in Principle?

Most people who’ve been truthful and consistent in their AIP application do go on to get a mortgage offer, but if your circumstances change or the lender updates their criteria, it could affect the outcome.

What can go wrong with an Agreement In Principle?

1. You get rejected from an Agreement In Principle

When you apply for an Agreement in Principle, the lender will check your eligibility against their criteria. They’ll want to know how much you earn, how much you’ve saved for a deposit and how much you’re hoping to spend on a home.

There is a chance when applying for an Agreement In Principle that you will be rejected. This could be due to a low income, a low house deposit or a complicated debt history. If you lose your job, start a new role, or become self-employed in the months leading up to your mortgage application, this could also affect your ability to get the loan you need — even if you already have a Mortgage In Principle. 

Your Mortgage In Principle will have been given to you based on the information you gave the bank, building society or mortgage broker at the time. If your circumstances have changed since then, lenders might offer you a different mortgage amount on your Agreement in Principle or reject you completely. 

If it happens to you, don’t be disheartened. At Tembo, we specialise in helping buyers increase their buying budget by finding them the best mortgage deals from over 100 lenders as well as a range of specialist buying schemes. Advising on over 20,000 mortgage products, if one lender rejects your application or does not offer you the mortgage size you need, we can work with you to try and find another. Find out more here

Does an Agreement in Principle do a hard credit check?

It depends on the lender. Some lenders run what’s called a soft credit check, which doesn’t affect your credit score and is only visible to you. Others use what’s known as a hard credit check, which leaves a mark on your credit file that other lenders can see.

Before you apply, always ask your lender or broker what kind of check they’ll do. At Tembo, we only carry out a soft search when issuing your free Mortgage in Principle, so you can find out how much you can expect to borrow without impacting your credit score.

Can a rejected Agreement In Principle affect your credit score?

This all depends on whether the lender carried out a ‘hard’ credit search or a ‘soft’ one. Hard credit searches are visible to other lenders and can affect your credit score in the long run. While, soft searches are only visible to you and they won’t impact your credit score.

Thankfully, it’s rare for an Agreement In Principle to require a hard credit check. Most lenders and mortgage brokers will give you an Agreement In Principle without delving too deeply into your credit history. 

Before you request an Agreement In Principle, find out what kind of search (if any) will be carried out. Too many hard credit searches in a short space of time can impact your ability to get credit in future, because lenders see it as a sign you’re desperately searching for credit. 

Avoid stress and hassle by getting a free Mortgage In Principle from Tembo - no credit check needed! 

2. You might need a larger mortgage

Let’s imagine your Agreement In Principle says you’d potentially be eligible for a loan of £150,000. Add this to a £30,000 deposit, and you have a total budget of £180,000. But what happens if you start your property search and all the apartments you love are £200,000 upwards? 

Before you settle for a cheaper home you don’t really like in an area you don’t want to live in,  it’s worth exploring a few ways to boost your affordability.

For example, if you have financially comfortable family members who want to help, you may be able to increase your borrowing potential with an Income Boost or Deposit Boost. 

3. You run out of time

An Agreement In Principle is usually valid for between 60 to 90 days. A Mortgage in Principle, which you can get from a bank, building society or mortgage broker, lasts much less than this, typically 30-60 days. So it’s a good idea to hold off getting an Agreement In Principle until you are ready to buy. Don’t worry if it expires before you get a chance to buy your first home, though. You can get a new one quickly and easily with Tembo.

If you want to wait to get an Agreement In Principle, but would like to get an idea of what you could afford, type your details into our mortgage calculator to get a rough idea of how much you could borrow, or create a Tembo plan to get a free, downloadable Mortgage In Principle instead. 

How reliable is an Agreement In Principle?

An Agreement In Principle gives you a fairly reliable indication of what you may be able to borrow. But there are no guarantees that you’ll get the loan outlined in the original document. This is especially true if your circumstances change or you missed important details when applying for your Agreement In Principle. 

Can you fail an Agreement In Principle?

When you request an Agreement In Principle, there’s no guarantee that you’ll get one. We wouldn’t describe this as ‘failing’ an Agreement In Principle, though. That sounds intimidating, but applying for an Agreement In Principle is not a test! And you can always re-apply for an Agreement In Principle with another lender, or later down the line when your circumstances change, for instance when you have a pay rise.

Getting an Agreement In Principle through a mortgage broker like Tembo can save you from having to make multiple applications. Our smart tech will check your eligibility against hundreds of lenders and mortgage deals to find one that’s right for you. At the end, we’ll give you a free Mortgage In Principle. Simply register your details to get started. 

What to do after getting an Agreement in Principle

Once you’ve got your Agreement in Principle, here’s what happens next:

1. Start house-hunting. You now have a budget and proof of affordability for estate agents.
2. Keep your finances stable. Avoid big spending or taking out new credit.
3. Gather documents. Payslips, bank statements and ID for your full mortgage application.
4. Speak to your broker. They’ll help you choose the best lender when you’re ready to buy.
5. Apply for your full mortgage. Once you’ve had an offer accepted.

An Agreement in Principle is a valuable first step on your homebuying journey. It helps you set expectations, shows sellers you’re serious, and gives you a realistic idea of what you can borrow, but it’s not a guaranteed offer.

If your Agreement in Principle is rejected or expires, don’t be disheartened. Tembo can compare thousands of mortgage products and specialist schemes to find one that fits you, and boost your affordability along the way.