Mortgages
Getting a mortgage Approval in Principle is a step closer to buying your new home or remortgaging. Here’s how to apply and what to do if you’re not approved.
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.
An AIP is also known as:
- A Mortgage in Principle (MIP)
- A Decision in Principle (DIP)
- An Agreement in Principle (AIP)
An Approval in Principle (AIP) is free and usually valid for six or 12 months.
Whether you’re at the start of your mortgage journey as a first-time buyer or moving house, a mortgage Approval in Principle is useful when you are:
- Buying a new property
- Remortgaging your home
- Building your own property
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Why do you need an Approval in Principle?
If you make an offer on a property, you’ll have a better chance of success if you have a mortgage Approval in Principle. This is because it shows you’re likely to be approved for a mortgage.
It isn’t a mortgage guarantee or a particular deal at this stage, but it can help show you’re a serious buyer, and some estate agents may request to see it.
An Approval in Principle confirms how much you can borrow with a mortgage and this will help you to stay within budget when you:
- Search for properties
- Plan renovation work
- Design and build a new home
Do you 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 an AIP, you may want to check your financial situation before you start house hunting, for example:
- Find out how much you can borrow by using a mortgage calculator.
- Discover how much deposit you’ll need in our mortgage deposits guide.
- Request a copy of your credit report on the Central Credit Register website for free to ensure that nothing shows up that a lender might question.
How to get an Approval in Principle
Firstly, use our comparison or a mortgage broker to find the best rates and mortgage deals.
Once you’ve found a mortgage deal you can apply for an AIP in two ways:
- via a mortgage broker (mortgage credit intermediary)
- directly to the lender.
The quickest way to apply is online, but if you prefer you can make your application over the phone or in a branch.
You won’t have to produce all the documentation needed for a mortgage to get an AIP, but the mortgage company will need to verify your identity and other information such as:
- Income and spending
- Dependants
- Existing property (if you have any)
An AIP typically lasts six or 12 months; however, if you haven’t found a property in that period and your circ*mstances don’t change, your AIP could be extended (subject to the lender’s criteria).
Will you be credit checked?
The lender will also run some eligibility checks to ensure you can afford your mortgage loan and have a good credit history.
This includes a credit check that looks at your borrowing record and may require a ‘hard search’ recorded on your credit report.
It’s usually a quick and simple process and you’ll normally get a decision within 10 working days.
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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 they haven’t supplied you with a reason, ask the lender for more information about why your application was rejected.
If you’re approved for less than you need
If your outgoings are high, for instance, you have a large loan with a long time to run before it’s paid off, this will affect how much you can afford to pay for your mortgage.
It could also be due to one of the following reasons:
- Salary is too low
- Credit rating is poor
- Regular outgoings are already high
How to improve your chances of approval
To improve your chances of success or being offered the amount you need, you could:
- Save for a higher deposit
- Ensure you credit record is accurate and up to date
- Clear any debts or reduce an outstanding loans
- Make any loan and/or credit card repayments on time
- Reduce your outgoings where possible
Our mortgage deposits guide shares some tips on ways to save and reduce your living costs.
If you don’t pass the credit check
Ask your lender why and request your credit report for free on the Central Credit Register 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.
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 circ*mstances.
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 full mortgage offer
To convert your AIP into a formal mortgage Letter of Offer you must fill in a full mortgage application and answer a more detailed set of questions about yourself, your financial circ*mstances and the property you’re planning to buy.
You’ll need to produce various documents that prove your:
- Identity
- Earnings
- Employment type
- Outgoings
When everything has been verified by the lender and all their requirements have been met, you’ll be issued with the Letter of Offer. This includes the full terms of the mortgage that you must check over with your solicitor and sign, usually within 30 days.
Once you have a full mortgage offer and you’ve found your dream home, you’re ready to make a move.
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Find a range of first time buyer and home mover mortgage deals in Ireland using our comparison.
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Mortgage Approval in Principle FAQs
Does applying for 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 time can negatively impact 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.
What's the difference between Approval in Principle (AIP) and a full mortgage offer?
For an Approval in Principle (AIP), you’ll need to answer a few questions about your financial situation, and based on the information you give, the lender will tell you how much you could borrow.
However, an AIP is not a legal document and does not entitle you to receive the mortgage amount set out in the AIP.
To secure a full mortgage offer, you must answer a more in-depth set of questions about yourself (and any other applicant) your finances and the property you would like to buy.
You’ll need to provide evidence of all your financial information and the lender will carry out the necessary credit checks before giving you a formal underwritten credit approval.
Claire Borowski
Last updated on 26/08/2024
