A Mortgage Agreement in Principle (AIP), also known as a Decision in Principle (DIP) or Mortgage Promise, is a crucial first step for anyone looking to buy a home in the UK. It’s a statement from a lender indicating how much they might be willing to lend you based on an initial assessment of your financial circumstances.

While not a legally binding guarantee, an AIP signals to estate agents and sellers that you’re a serious buyer, strengthening your position in the competitive UK property market. This guide explains what an AIP is, how to obtain one, the best lenders for different credit profiles, and the pros and cons of applying directly versus using a mortgage broker.

What is a Mortgage Agreement in Principle?

An AIP is a preliminary indication from a mortgage lender about how much you could borrow to purchase a property. It’s based on a basic review of your income, outgoings, credit history, and deposit size, typically involving a soft credit check that doesn’t impact your credit score.

According to the HomeOwners Alliance, having an AIP can make your offer more appealing, as 80% of estate agents in the UK prefer buyers who have one before viewing properties. An AIP is valid for 30–90 days, depending on the lender, and can be renewed if it expires before you find a property.

While an AIP doesn’t guarantee a mortgage offer (which requires a full application, property valuation, and hard credit check), it helps you:

  • Understand your borrowing capacity.
  • Set a realistic budget for your property search.
  • Demonstrate financial readiness to sellers and estate agents.

For example, consider Sarah, a first-time buyer in Manchester. She wants to buy a £250,000 flat but isn’t sure how much she can borrow. By obtaining an AIP, she learns a lender is willing to offer £200,000 based on her £40,000 salary and £30,000 deposit. This clarity helps her focus on properties within her budget and makes her offer more attractive to sellers.

Step-by-Step Process to Obtain a Mortgage Agreement in Principle

Here’s how a borrower can secure an AIP in the UK:

  1. Assess Your Finances: Gather details about your income (e.g., salary, bonuses), monthly outgoings (e.g., loans, credit cards), and deposit size. Check your credit report via agencies like Experian or Equifax to ensure accuracy, as errors can affect your AIP. In 2024, 15% of UK credit reports contained errors, according to MoneySuperMarket, which could lead to rejections if uncorrected.
  2. Choose Your Application Method: Decide whether to approach a lender directly or use a mortgage broker. Direct applications suit those confident in their lender choice, while brokers offer access to a wider range of deals, including exclusive ones. More on this in the pros and cons section below.
  3. Complete the AIP Application: Provide details such as:
    • Personal information (name, address history for the last three years).
    • Employment status and income.
    • Monthly expenses and existing credit agreements.
    • Deposit amount. Most lenders offer online AIP applications, taking 10–15 minutes, with decisions often instant or within 24 hours. For example, NatWest and Halifax provide online AIP tools that don’t require a full credit check.
  4. Undergo a Soft Credit Check: Lenders perform a soft credit check to assess your creditworthiness without affecting your credit score. Be cautious, as some lenders may use a hard credit check, which can impact your score if you apply multiple times.
  5. Receive Your AIP Certificate: If approved, you’ll receive a certificate stating the amount you could borrow. This can be shown to estate agents when viewing properties or making offers. For instance, Sarah receives her AIP certificate from Nationwide, confirming she can borrow £200,000, which she uses to negotiate on her chosen flat.
  6. Review and Renew if Necessary: Most AIPs last 30–90 days. If you haven’t found a property within this period, you can renew with the same lender or apply elsewhere. Ensure your financial circumstances haven’t changed, as this could affect the new AIP.
  7. Proceed to Full Mortgage Application: Once you find a property, contact your lender or broker to start the formal application, which includes a hard credit check, affordability assessment, and property valuation. The lender will issue a formal mortgage offer if all checks are satisfactory.

    8. Best Mortgage Lenders for Different Credit Profiles

    Lenders assess borrowers based on credit history, income, and affordability, with some specializing in specific credit profiles. Below is a table ranking top UK lenders for good, medium, and poor credit ratings, based on their lending criteria, rates, and flexibility in 2025.

    Credit Rating Lender Key Features Typical Rates (Fixed, 2025) Notes
    Good Credit (Excellent Score, e.g., 900+ Experian) Nationwide Competitive rates, soft credit checks for AIP, wide range of mortgage products. 3.8%–4.2% (2-year fixed) Ideal for stable income and large deposits. High street lender with strong customer service.
    HSBC Flexible criteria, exclusive deals for existing customers, fast AIP process. 3.9%–4.3% (5-year fixed) Suitable for professionals with strong credit history.
    Barclays No hard credit check for AIP, rewards existing customers with lower rates. 4.0%–4.4% (2-year fixed) Great for first-time buyers with good credit.
    Medium Credit (Fair Score, e.g., 700–900 Experian) Santander Flexible underwriting, accepts borrowers with minor credit issues. 4.2%–4.7% (2-year fixed) Good for self-employed or those with small credit blips.
    NatWest Soft credit check for AIP, supports medium credit with stable income. 4.3%–4.8% (5-year fixed) Offers online AIP in under 10 minutes.
    Lloyds Bank Exclusive discounts for Club Lloyds customers, lenient on minor credit issues. 4.2%–4.9% (2-year fixed) Strong for remortgaging with fair credit.
    Poor Credit (Low Score, e.g., <700 Experian) Pepper Money Specialist lender for adverse credit, considers CCJs and defaults. 5.5%–6.5% (2-year fixed) Higher rates but accessible for subprime borrowers.
    Kensington Mortgages Tailored for poor credit, flexible on past bankruptcies or IVAs. 5.7%–6.8% (5-year fixed) Requires larger deposits (15–25%).
    Precise Mortgages Subprime lender, accepts recent credit issues with higher rates. 5.8%–7.0% (2-year fixed) Often works through brokers for bespoke deals.

    Notes:

    • Rates are indicative based on 2025 market trends and may vary depending on loan-to-value (LTV) ratios and deposit size.
    • Borrowers with poor credit may need a 15–25% deposit and face higher interest rates due to increased lender risk.
    • Always check with lenders or brokers for the latest rates and eligibility criteria.

    For Sarah, with a good credit score of 920, Nationwide offers her a competitive 3.9% fixed rate. However, someone with a medium credit score (e.g., 750) might opt for Santander for their flexibility, while a borrower with a poor score (e.g., 600) could approach Pepper Money via a broker for a tailored deal.

    Pros and Cons of Obtaining an AIP Directly vs. Using a Mortgage Broker

    Choosing between applying for an AIP directly with a lender or through a mortgage broker depends on your financial situation, confidence in navigating the mortgage market, and time availability. Here’s a breakdown of the pros and cons:

    Applying Directly with a Lender

    Pros:

    • Cost-Free: No broker fees, which can range from £300–£1,000, saving you money upfront.
    • Faster for Simple Cases: If you have a good credit score and straightforward finances, direct applications (e.g., via Nationwide or Halifax) are quick, often taking 10–15 minutes online.
    • Direct Relationship: Build a rapport with the lender, which can streamline the full mortgage application process.
    • Control Over Choice: You select the lender based on your research, ideal if you prefer a specific bank like HSBC for existing customer perks.

    Cons:

    • Limited Options: You only access deals from one lender, potentially missing better rates or exclusive products available through brokers.
    • Time-Intensive: Researching lenders and their criteria (e.g., minimum income, credit history) requires significant effort, especially for complex cases.
    • Risk of Rejection: If you don’t meet the lender’s criteria (e.g., NatWest’s minimum income requirements), you may face rejection, and some lenders use hard credit checks, risking your credit score.
    • Less Guidance: No expert advice on complex situations, such as self-employment or poor credit, which could lead to unsuitable deals.

    Using a Mortgage Broker

    Pros:

    • Access to Exclusive Deals: Brokers like L&C Mortgages offer access to 45+ lenders, including specialist lenders like Pepper Money, which aren’t available directly. In 2024, 60% of UK mortgages were arranged through brokers, per The Mortgage Hut.
    • Tailored Advice: Brokers assess your circumstances (e.g., poor credit, irregular income) and match you with suitable lenders, reducing rejection risk.
    • Time-Saving: Brokers handle paperwork and follow-ups, chasing lenders to expedite the process, which is critical in fast-moving markets like London.
    • Expertise for Complex Cases: Ideal for subprime borrowers or those using schemes like Help to Buy, as brokers navigate niche lenders and criteria.

    Cons:

    • Potential Fees: Some brokers charge fees (£300–£1,000), though fee-free options like L&C exist. Always clarify costs upfront.
    • Dependence on Broker Quality: A poor broker may prioritize commission over your needs, so check reviews on platforms like Trustpilot.
    • Slower for Simple Cases: If you have excellent credit and a straightforward application, a broker’s involvement may add unnecessary steps.
    • Less Direct Control: You rely on the broker’s recommendations, which may feel less personal than dealing directly with a lender.

    Scenario Example: Sarah, with good credit, applies directly to Nationwide and secures an AIP in 10 minutes with no fees. However, John, with a poor credit score due to a past CCJ, uses a broker who connects him with Pepper Money, securing an AIP that a high street lender like Barclays would likely reject. John pays a £500 broker fee but saves time and accesses a deal tailored to his needs.

    Tips for a Successful AIP Application

    • Check Your Credit File: Use online credit checking services such as Experian, Equifax, or TransUnion to correct errors before applying. A 2023 MoneySavingExpert survey found that 20% of rejections were due to credit report inaccuracies.
    • Avoid Multiple Hard Credit Checks: Stick to lenders or brokers using soft checks (e.g., NatWest, L&C) to protect your credit score. Multiple hard checks within six months can reduce your score by 50–100 points.
    • Be Honest: Provide accurate financial details, as discrepancies can lead to rejection during the full application.
    • Prepare Documents: Have proof of income, outgoings, and deposit ready, even though they’re not always required for an AIP.
    • Consult a Broker for Poor Credit: Specialist lenders like Kensington are often broker-only, increasing your chances of approval.

    Final thoughts

    A Mortgage Agreement in Principle is an essential tool for UK homebuyers, offering clarity on your borrowing capacity and boosting your credibility with estate agents.

    By following the step-by-step process and choosing the right lender for your credit profile—whether Nationwide for good credit, Santander for medium credit, or Pepper Money for poor credit—you can navigate the property market with confidence. Deciding between applying directly or using a broker depends on your financial complexity and time availability.

    Direct applications save costs but limit options, while brokers offer expertise and access to exclusive deals, especially for subprime borrowers.

    HouseLegal has relationships with many independent, trusted mortgage brokers and so if you’re looking for a mortgage broker to assist you, contact HouseLegal today.