Declined Agreement in Principle

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Home » First Time Buyer » Declined Agreement in Principle

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Samuel

First-time buyers | Residential Mortgages | Buy to Let

I am an expert in: Declined Agreement in Principle

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Can an Agreement in Principle be declined?

Yes, and there are many reasons a mortgage lender may decline an Agreement in Principle. A common one is that the applicant doesn’t pass the lender’s credit score. That may be down to bad credit, such as a missed payment, County Court Judgment (CCJ) or a default registered on the credit report.

Another reason is that the mortgage lender deems the mortgage unaffordable, but in this case, they might offer an alternative lending amount. For example, you may be applying for a mortgage of £200,000, but the lender may say that they will only lend a maximum of £170,000.

Alternatively, applicants may not fit the mortgage lender’s internal policy around age, employment, or debt-to-income ratio. These are just a few of many reasons why a mortgage lender may decline an Agreement in Principle.

What happens if my Agreement in Principle (AIP) is declined? What are the next steps?

Having an Agreement in Principle declined doesn’t necessarily stop you getting a mortgage. There are hundreds of mortgage lenders out there, many of which may be happy to lend.

When a client has had an Agreement in Principle declined, we will complete a full fact-find and get a copy of their credit report, payslips or accounts if they’re self-employed. Then we’d review the file and make a formal recommendation of an alternative mortgage lender that’s happy to lend.

Why has my AIP been declined?

If you’ve had an Agreement in Principle declined through a mortgage broker, or directly with a lender, you can ask for the reasons.

A lender will usually be upfront about why it’s declined. They will give a generic reason such as a credit report issue or a policy issue. Once we’ve got a general idea of the reason, we’d complete our own fact-find and recommend an alternative product.

Can a rejected Agreement in Principle affect credit score?

Mortgage lenders typically carry out a soft search credit check when running an Agreement in Principle. This would not usually have a negative effect on your credit score.

Can an Agreement in Principle be changed?

Yes, an Agreement in Principle can be changed at any point. Typical changes may be to purchase price, deposit amount, or the product you’re applying for.

Can a mortgage be declined after an Agreement in Principle?

An Agreement in Principle is typically an automated credit check by the mortgage lender without them checking any paperwork. Therefore, a mortgage application can still be declined after the Agreement in Principle.

Once the full mortgage application has been submitted, the lender carries out further checks. If they aren’t happy with the paperwork for the deposit, or payslips or bank statements – and particularly if there are discrepancies – the lender may not be comfortable with lending.

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Everyone’s different. You might be self-employed. You might have some credit history issues – whatever your situation, we will find the most suitable product available to you from across the whole market.

How many times can you apply for an AIP?

There’s no limit to how many times you can apply for an Agreement in Principle. A mortgage broker like us at JB Mortgages would run all the necessary due diligence checks upfront.

We would usually just carry out one Agreement in Principle application, get it right the first time, and then you can start looking for a property.

How long does it take to get AIP approval?

We aim to secure an Agreement in Principle for our clients within 24 hours of the request. For urgent cases, we can usually secure one within just a few hours.

How can I better my chances of getting my Agreement in Principle approved?

The most common reason for not getting approval is not passing the lender’s credit check.

So if you’re thinking about applying for a mortgage, it’s a good time to review your credit report.

Make sure all your payments are up to date – and if they’re not, you can take steps to make changes and start tidying up your credit file.

How can a mortgage broker help here? Is there anything else to add?

We recommend speaking with a mortgage broker very early in the house-buying process. We can set out how much you can borrow and the costs, and then get an Agreement in Principle secured upfront. Then, you can go and find a property with your AIP already in place.

Key Takeaways:

An Agreement in Principle (AIP) may be declined due to failing the lender’s credit score (such as having a missed payment or a County Court Judgment), the mortgage being deemed unaffordable, or not fitting the lender’s internal policy around age, employment, or debt-to-income ratio.
Having an AIP declined does not stop you from getting a mortgage, as there are many other mortgage lenders who may be happy to lend.
Lenders typically carry out a soft search credit check when running an AIP, which would not usually have a negative effect on your credit score.
A mortgage can still be declined after an AIP is issued because the AIP is typically an automated credit check, and the lender may find discrepancies or issues when checking paperwork during the full mortgage application.
To increase your chances of AIP approval, you should review your credit report and ensure all payments are up to date, as not passing the lender’s credit check is the most common reason for not getting approval.

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