An Agreement in Principle (AIP) is a statement from a lender indicating that, based on the information provided by the borrower, they are likely to be approved for a mortgage. An AIP is also sometimes referred to as a mortgage in principle, a decision in principle, or a mortgage promise.
To obtain an AIP, the borrower will usually need to provide some basic information about their financial circumstances, such as their income, outgoings, and credit history. The lender will use this information to assess the borrower’s suitability for a mortgage and to provide an indication of the amount that the borrower may be able to borrow. This will often involve the lender carrying out a soft credit check to evaluate the borrower’s creditworthiness.
A credit check is a process in which a lender or other financial institution reviews the borrower’s credit history in order to assess their ability to repay a loan. Credit checks are typically carried out using credit reference agencies, which hold detailed information about an individual’s credit history, including any credit accounts that they have held, whether they have made timely payments, and any defaults or other issues that may have been recorded on their credit file.
It is important to note that an AIP is not a guaranteed mortgage offer and the lender will need to carry out further checks before issuing a formal mortgage offer.
