What should you do if your mortgage has been declined after agreement in principle?

About this guide

An Agreement in Principle (AIP) is exciting to receive. It can make the thought of owning a home seem less of a thought and more of a real-world option for you and your family. But, it’s important to understand that an AIP is highly conditional and based on an incomplete, surface-level assessment of your information. AIPs can be declined just as quickly as they can be accepted if some new evidence rears its head. And if that does happen, what next? Is a declined mortgage the end of the road?

At The Mortgage Heroes, we know all there is to know about mortgages. We’ve spent years helping clients in the UK find the right mortgage deal. We can help you strengthen your application, whatever your particular situation and history. With our heroes on the case, we will look at all options. From bad credit scores to foster carers to contractors, we’ll try to help find everyone a place to call home.

In this guide, we explain what you should do if your mortgage has been declined after an Agreement in Principle.

What is a Mortgage Agreement in Principle?

Having your AIP application accepted can make your property owning dreams feel just within reach. Essentially, an AIP is a tentative, preliminary agreement between you and a mortgage lender, stating that they would in principle be willing to lend you a specified amount. An AIP should be free and is generally quick and easy to apply for, with a decision usually issued within 24 hours. However, both the agreement as a whole and the specified amount are not set in stone, so it’s possible you could be rejected by the same lender that granted you an AIP.

Also known as a Mortgage Promise, a Mortgage in Principle, or Decision in Principle, an AIP isn’t compulsory but is highly desirable when it comes to shopping around for houses. This is because it will demonstrate proof of funds, showing you’re a serious buyer who is likely to be accepted for a mortgage. And yet, it should not be confused as constituting a real offer. It’s a probably, not a yes.

See more: Mortgage Terminology Explained – A Glossary of Mortgage Terms

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Agreement in Principle FAQs

  • Will an Agreement in Principle Affect My Credit Score?

    When you apply for an AIP, the lender will typically carry out a credit check using either a soft or hard search. Whilst soft searches are only visible to you, any hard searches of your credit report will leave a footprint for any future lenders to see. Whilst this doesn’t affect your credit score directly, some lenders may see lots of hard searches close together as evidence of previous rejections from other lenders or desperation for finance. With such large sums of money at stake, any unease about your application is likely to make lenders say no. As a result, it’s wise to ensure the lender you apply for an AIP with will only soft search your credit report.

    See more: Credit Score & Mortgages – What Credit Score Do You Need for a Mortgage?

  • How Long Does a Mortgage Agreement in Principle Last?

    Depending on the lender, an AIP can last anywhere between 60 and 90 days. If your property search goes on for longer than this, you may need to apply again to ensure estate agents take you seriously, especially if you’re a first time buyer.

  • Can a Mortgage Application Be Declined After Agreement in Principle?

    As previously mentioned, an AIP doesn’t constitute a real mortgage offer, and the agreement can be overturned when you make your full application. This is because the information and checks required to issue an AIP are much more basic than the in-depth research that lenders carry out before a full offer, and often don’t require supporting documentation or evidence. As a result, it’s possible other information will come to light later that will change the lender’s decision.

    See more: What Should You Do if Your Mortgage Has Been Declined by Underwriter?

What Can Cause a Mortgage to be Declined After Agreement in Principle?

Your full application can be declined after an AIP for various reasons, usually because new information comes to light, or something changes with your circumstances. During their full assessment of your suitability, lenders may discover any number of things that they didn’t know when they issued the AIP. Factors that may trigger a rejection include:

  • Any recent job changes or cuts to your income
  • New forms of credit taken out, affecting your affordability
  • Evidence of missed repayments
  • Mistakes or discrepancies in your application
  • New information being supplied in a credit report from a different credit reference agency
  • Not being registered to vote
  • Not meeting internal lender criteria e.g., job status, marital status, property location
  • The lender has suspicions of fraud or money laundering
Declined Mortgages

What to Do if Your Mortgage Has Been Declined After Agreement in Principle

Don’t Rush to Reapply

It can be tempting to submit your application again with a different lender in a hurry, especially if the house of your dreams is slipping away! Despite how disappointing it can be, it’s best not to immediately reapply after a refusal. This is because every application will prompt a hard search of your credit report, and multiple hard searches close together may ring alarm bells for certain lenders. Instead, it is generally recommended to wait and apply again in 3-6 months.

Check Your Credit Report

Often a mortgage is declined after an AIP because new information comes to light to do with your financial profile. If your lender won’t tell you specifically why they rejected you, take a look at your credit report and try and identify areas for improvement. Simple things like ensuring you’re on the electoral roll and closing down unused credit card accounts can make a big difference.

See more: Bad Credit Mortgages

Make Your Application More Attractive

There are a lot of ways your application more attractive, making success the second time around much more likely. If you have existing debts, spend the time between your applications working to pay these off, as prospective lenders will want to see that you can manage your money responsibly. Another way to prove this is to budget more carefully and reduce monthly outgoings. That way, the lender will see you have plenty of disposable income and will be fully able to handle the mortgage repayments. If you’ve previously been declined, it also might be a good idea to try and build up a larger deposit, so you don’t seem as much of a risk.

See more: Mortgage Declined – What to Do Next?

Get Professional Advice

If you’re struggling with your mortgage and your dream home is starting to seem further away than ever, don’t worry. Working with an expert mortgage broker can help you figure out the cause of your rejection and fine-tune your application for the next time around. The Mortgage Heroes have years of experience helping those who have previously been declined access the finance they need to buy their property, liaising with lenders directly to ensure clients get the most appropriate deals. With expert representation and advice, you can rest easy that you’ll be set up for future finance success.

Trusted Mortgage Advice with the Mortgage Heroes

People all over the UK know that when it comes to sourcing a mortgage deal, The Mortgage Heroes have them covered. We’re expert mortgage brokers with years of experience helping applicants access finance – even those in difficult or unusual situations. Whatever your background, whether you’re self-employed or a first time buyer, we can help you figure out the next steps to take. It’ll be move in day in no time at all!

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*Your home may be repossessed if you do not keep up repayments on your mortgage.

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