What Is The Meaning Of AIP?
AIP stands for Agreement In Principle.
It is a lender’s initial indication of how much it may be prepared to lend you, issued before the application has been fully underwritten. You will also see it called a DIP (Decision In Principle), a mortgage promise or a lending certificate — these all mean essentially the same thing.
An AIP is the first formal step in most property finance applications. It is usually based on information you have supplied plus a credit search, and it comes before a valuation, before documents are verified and before a human underwriter has read the file properly.
What An AIP Is Not
An AIP is not a formal offer and not a guarantee of funding. It is subject to underwriting, a satisfactory valuation and verification of everything you have told the lender.
This distinction matters commercially. Estate agents and vendors often ask for an AIP as evidence you are a serious buyer, which is a reasonable use of it. Relying on one as though the money is committed is not.
How Long Does An AIP Last?
Typically somewhere between 30 and 90 days, depending on the lender. If it lapses it can usually be refreshed, though that may involve a fresh credit search and the lender’s criteria or pricing may have moved in the meantime.
Does An AIP Affect Your Credit Score?
It depends on the search the lender runs. Many use a soft search at AIP stage, which is visible only to you and leaves no mark others can see. Some run a hard search, which is recorded on your file and visible to other lenders.
A single hard search is rarely a problem. Several in quick succession can be, because a cluster of searches reads as someone applying everywhere and being declined. It is worth asking which type of search a lender uses before you agree to it — and worth avoiding the temptation to collect AIPs from four or five lenders at once.
Why An AIP Can Still Be Declined
This catches people out regularly. Common reasons an agreed AIP does not convert into an offer:
- The valuation comes in low, so the loan no longer fits the lender’s LTV limit
- Income or rental figures cannot be evidenced at the level stated
- Adverse credit emerges that the initial search did not pick up — see CCJ
- The property is unsuitable to that lender — construction type, tenure, use class or condition
- Rental cover fails the stress test at full underwriting — see ICR and DSCR
The best protection against a late decline is getting the case in front of the right lender at the outset, with anything awkward disclosed upfront rather than discovered at underwriting.
What You Need To Get An AIP
- Details of the property, the purchase price or value, and the loan you want
- Where the deposit is coming from
- For investment property, the expected rental income
- For a limited company purchase, the company details and structure
- An outline of any adverse credit
Read more about commercial mortgages, buy to let mortgages and bridging loans, or speak to us.
We arrange non-regulated business and commercial property finance, including buy to let lending to limited companies. We are not authorised or regulated by the Financial Conduct Authority and do not advise on or arrange regulated residential mortgages.
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