If you`re looking to buy a property, you`ll likely need an agreement in principle (AIP) from a mortgage lender. An AIP is a pre-approval for a mortgage, which indicates that the lender is willing to lend you a certain amount of money to purchase a property, subject to certain conditions. Before issuing an AIP, the lender will carry out checks to ensure that you`re eligible for a mortgage.

Here are some of the things that will be checked when you apply for an agreement in principle:

Credit score and history

One of the first things that a lender will check is your credit score and history. This will give them an idea of your financial history and how much of a risk you are to lend money to. If you have a poor credit score or a history of missed payments, it can be harder to get an AIP, or you may be offered a higher interest rate.

Income and outgoings

Another important factor is your income and outgoings. The lender will want to ensure that you can afford the mortgage repayments, so they`ll take into account your income, any debts you have and your regular monthly expenses. They`ll also factor in any other commitments you have, such as childcare costs or other loans.

Employment status

Your employment status will also be checked. Lenders prefer applicants who are in full-time employment, but they may also consider those who are self-employed or on a zero-hour contract. If you`re self-employed, you`ll need to provide documentation such as tax returns to prove your income.

Deposit

The size of your deposit will also be checked. The larger your deposit, the more likely you are to be approved for a mortgage and the better interest rate you`ll be offered. If you have a small deposit, you may still be able to get an AIP, but you`ll need to have a good credit history and prove that you can afford the monthly repayments.

Property details

Finally, the lender will want to know the property details, such as the price, location, and type of property. They`ll also want to carry out a valuation to ensure that the property is worth the amount you`re looking to borrow.

In summary, when applying for an agreement in principle, the lender will check your credit score and history, income and outgoings, employment status, deposit size and property details. If you meet their criteria, you`ll be issued with an AIP, which can help you when making an offer on a property.