Why Can`t I Get an Agreement in Principle

If you`re currently in the process of house hunting or trying to secure a mortgage, you may have come across the term “agreement in principle” (AIP). An AIP is a conditional mortgage offer from a lender that is based on a preliminary assessment of your financial situation. Essentially, it`s a way for you to determine how much a lender is willing to lend you before you make an offer on a property.

However, it`s not uncommon for individuals to struggle in obtaining an AIP. Some of the most common reasons why you may have difficulty getting an AIP include the following:

1. Poor credit history – Lenders assess your credit history to determine whether you are a reliable borrower. If you have a history of missed payments, defaults or CCJs, lenders may be less likely to offer you an AIP.

2. Insufficient income – Lenders will take a look at your income and outgoings to determine whether you can afford to repay the mortgage. If your income is low or your outgoings are high, you may struggle to obtain an AIP.

3. Lack of deposit – Most lenders require a deposit of at least 5% of the property value before they will offer an AIP. If you can`t raise the necessary funds, you may struggle to obtain an AIP.

4. Inconsistent employment history – Lenders may be hesitant to offer an AIP if you have a history of unstable employment. Ideally, lenders want to see a consistent employment history with the same employer over a significant length of time.

5. Unusual property – If you are looking to purchase an unconventional or unusual property, such as a thatched cottage or a flat above a shop, some lenders may be hesitant to offer you an AIP.

If you`re struggling to obtain an AIP, there are a few things you can do. Firstly, make sure you have an up-to-date credit report and check for any errors. You should also try to pay off any outstanding debts and increase your savings to improve your chances of securing an AIP. It may also be worth speaking to a mortgage broker who can advise you on the best course of action.

In conclusion, obtaining an AIP can be a crucial step in the home buying process, but it`s not always easy. If you`re struggling to obtain an AIP, it`s important to identify the reasons why and take steps to rectify any issues. By doing so, you can increase your chances of securing an AIP and getting one step closer to purchasing your dream home.