What Is a Mortgage Agreement In Principle & Why You Need One?

Author: Dominic Leigh Southey

Date: 07/05/2025

As a first-time homebuyer, the journey to purchasing your first property can seem overwhelming. With so many factors to consider, it’s easy to feel like you’re facing a maze of paperwork, jargon, and financial terms. However, there’s one step that can make the process smoother and give you a clear direction: the Mortgage Agreement in Principle (AIP).

But what exactly is an AIP, why is it crucial for first-time buyers, and how can it benefit you when buying a home in Wiltshire or Somerset? In this blog, we’ll break down the importance of an AIP, how it works, and why you need one before you start your home-buying journey.

What is a Mortgage Agreement in Principle (AIP)?

A Mortgage Agreement in Principle (sometimes called a Mortgage in Principle, Decision in Principle, or AIP/DIP) is a document from a lender that states how much they are willing to lend you based on the information you’ve provided, typically your income, outgoings, and other financial commitments.

Think of it as a pre-approval from a lender that gives you an idea of how much you can borrow before you officially apply for a mortgage. This agreement is usually based on a soft credit check (which won’t affect your credit score) and allows the lender to give you an estimate of your borrowing potential.

While an AIP isn’t a guarantee that you’ll get a mortgage, it gives you a solid foundation and helps guide you in your property search.

Why Do First-Time Buyers Need a Mortgage Agreement in Principle?

As a first-time buyer, you might wonder why you need an AIP before starting the house-hunting process. After all, isn’t it enough to just find a property you like and then apply for a mortgage?

Here are some compelling reasons why an AIP is essential:

1. Helps You Set a Realistic Budget

One of the first steps in buying a home is determining how much you can afford to borrow and how much you can realistically spend on a property. With an AIP, you’ll have a clear understanding of your borrowing power, which will help you set a realistic budget for your home search.

For example, if your AIP shows that you can borrow £200,000, you can start your property search within that budget and avoid wasting time looking at homes that are out of your price range.

You can also use our handy mortgage borrowing calculator to get a rough idea yourself.

2. Strengthens Your Position with Sellers

In a competitive housing market, having an AIP can give you an advantage over other buyers. In areas like Wiltshire and Somerset, where properties can sell quickly, having an AIP demonstrates to the seller that you are a serious buyer with the financial backing to proceed. Sellers are more likely to accept an offer from someone who has an AIP because it shows you’re ready and able to move forward with a mortgage.

Without an AIP, a seller may be reluctant to take your offer seriously, especially if you’re competing against buyers who already have one. Having this document can speed up the overall process and put you in a stronger position to negotiate.

3. Speeds Up the Mortgage Application Process

Once you’ve found the perfect property and are ready to submit your official mortgage application, having an AIP already in place can speed up the entire process. The lender will have already conducted a preliminary assessment of your finances, so when you formally apply for a mortgage, much of the groundwork will have been done.

This can be especially important if you’re looking to move quickly, such as in a hot market or when there’s competition for properties in your area. With an AIP, you can act fast and avoid delays that could cause you to miss out on your dream home.

4. Reduces the Risk of Mortgage Rejection

One of the most stressful parts of the home-buying process is receiving a mortgage rejection after you’ve already found a property. An AIP helps reduce this risk because the lender will have already assessed your financial situation and given you an estimate of what they’re willing to lend.

While it’s not a guarantee that your mortgage application will be approved, having an AIP gives you a good indication that you’re on the right track and that you’re borrowing within your means. This reduces the chances of a shock rejection later in the process.

5. Gives You More Control and Confidence

As a first-time buyer, it can be overwhelming to navigate the world of mortgages. Having an AIP in hand gives you more control over the process and helps build your confidence. You’ll have a better understanding of your financial situation, and you won’t have to guess how much you can afford when shopping for properties. This clarity is especially important when viewing homes, as you’ll know what you can comfortably offer without overstretching your budget.

The Steps Involved in Getting a Mortgage Agreement in Principle

Now that you understand why an AIP is crucial, let’s look at how to go about obtaining one. The process is straightforward and can typically be done online in just a few steps.

1. Research Lenders and Choose One

Start by researching mortgage lenders. You can go directly to a bank or building society, or consider a mortgage broker who can help you compare different options. As a first-time buyer, it may be beneficial to work with a broker to find the best deal for your situation, as they have access to a range of products from different lenders and aren't tied to a specific lenders products.

2. Provide Your Financial Information

To get an AIP, you’ll need to provide some personal and financial information, such as:

1. Your income (including salary, bonuses, and any other income sources).
2. Details of your outgoings (e.g., current debts, living expenses, etc.).
3. Information about your credit history (this will be checked by the lender) -  get ahead of the game and check your credit score for free here.
4. Details of any assets or savings you have.

The lender will use this, along with further details information, to assess how much they’re willing to lend you.

3. Receive Your AIP

Once the lender has reviewed your financial situation, they’ll provide you with an Agreement in Principle. This will outline how much they’re willing to lend you and any conditions that may apply. The AIP will typically last for 30-90 days, and you’ll need to reapply if it expires before you find a property.

Common Misconceptions About Mortgage Agreements in Principle

There are a few common misconceptions about AIPs that first-time buyers should be aware of:

1. An AIP is not a guarantee of a mortgage: It’s important to remember that an AIP is not a formal mortgage offer. The lender may still reject your application later on if other factors (like the property’s value or condition) don’t meet their criteria.
2. It doesn’t mean you can borrow the full amount: The AIP gives you an estimate based on your finances, but your final mortgage offer may differ based on a more detailed assessment following a full mortgage application.
3. You don’t need an AIP to make an offer: Technically, you don’t need an AIP to make an offer on a property, but it’s strongly recommended, especially if you want to improve your chances of having your offer accepted.

How to Move Forward with Your Home Purchase

Once you’ve secured your AIP, the next step is to start looking for properties within your budget. It’s a good idea to work with a local estate agent in Wiltshire or Somerset who knows the market and can help you find homes that suit your needs and budget. You can also use our mortgage borrowing calculator and mortgage repayment calculator to get a basic understanding of how much you could borrow and the monthly costs.

When you find a property you love, you can submit your offer with the confidence that you have your AIP to back it up. From there, you’ll move on to the official mortgage application and final approval process.

Call to Action: Ready to Get Started?

If you’re a first-time buyer in Wiltshire, Somerset or the rest of the UK, getting a Mortgage Agreement in Principle is a crucial first step in your home-buying journey. At First Mortgage Steps, we’re here to guide you through the process and help you secure the best deal on your mortgage.

Contact us today to learn more about the AIP process and how we can assist you in securing your first home!