It’s a wonderful feeling to get a mortgage Agreed in Principle (AIP) as it brings you that bit closer to bagging your new home. Unfortunately, for a number of people this feeling doesn’t always last long, as mortgages can still be declined after an Agreement in Principle.
Don’t worry though, because every lender is different, and getting declined by one mortgage provider doesn’t necessarily mean others will reject your application as well. If you do find yourself with a mortgage that gets AIP then declined, it’s likely due to information held on your Credit Report. There’s a strong chance that the lender found something that didn't meet their criteria when searching through your information.
Always check your information yourself ahead of time, because it’s likely that you can change whatever it is that may cause some lenders to decline your mortgage application.
What caused my AIP mortgage to decline?
It’s important to remember that a mortgage that’s been AIP, is not a guarantee from the lender. It’s only a statement to say how much they might be willing to give you. This will always be dependant on them finding nothing significant that could change things between then and your application.
If you are declined, you might not be given a definitive reason why. It can even just come down to a change in your personal circumstances between getting an AIP mortgage and the final application.
There are a few common causes that could lead to your application getting declined, including:
- Recently changing your job - How long you’ve been at your job is an indication of your overall stability with some lenders. When you’ve recently changed jobs, it’s more difficult to assess a consistent source of income for you.
- Taking out a new line of credit - Most lenders look at six years of payment history. Assessing if payments were made on time, in full, or if they were made at all. Opening a new form of credit, will affect your affordability rating with lenders, and they will feel more uneasy if it looks like you could be borrowing beyond your means.
- Not meeting specific lender criteria - There’s always internal criteria a particular lender will have that you’ll need to meet. Such as if you’re in full-time employment or not, or if you’re single or married. Often you won’t even be shown these.
- Any significant change in your income or outgoings - If you haven’t had any payslips that verify your income yet, for example if you’ve changed jobs, it will be difficult to prove.
- Missed payments and arrears - If you suddenly start missing payments and falling into arrears shortly before applying for a mortgage, it’s going to affect things. The occasional missed payment in the past may not be an issue with most lenders. However, recent misses will likely be seen as the first signs of financial stress.
- Discrepancies or inconsistencies with your application - Always be upfront about all the key facts during your application. If you accidentally omit or ‘tweak’ anything, this will be found anyway and could mean you suddenly don’t meet the criteria.
- Information held at a different Credit Reference Agency - Lenders will likely check your Credit Report at more than one Credit Reference Agency. Each agency updates their information independently. So, this could mean that information that wasn’t seen during AIP check, suddenly comes to light.
Agreement in Principle vs a mortgage application
It’s important to understand that there are different checks that take place for an AIP and a full mortgage application. This is essentially why you can pass one stage and fail at the other, even when you go with the same lender that offered you the AIP.
An Agreement In Principle is an important step towards securing a mortgage and buying a house. But remember it’s not legally-binding, and the lender has the right to withdraw, or offer you a different amount or mortgage product (and interest rate).
With an AIP you’ll mainly be assessed by a lending multiplier that’s applied to your income, which will also look at your outgoings. The Lender’s individual criteria will be factored into this. A mortgage application will take this information and put it under the microscope. This will involve a more thorough search of your Credit File, as well as checks with other Credit Reference Agencies if applicable.
Does this affect my credit score?
No, being declined for either an AIP or an actual mortgage application will not impact your Credit Score in a negative way. Also, other lenders won’t be able to see whether or not you were declined, so it’s not likely to affect your ability to take out credit in the future.
As mentioned, an AIP is no guarantee that the mortgage amount you’re offered will be what you get or even if it will be accepted. But they are still a key part of getting a mortgage accepted. If you are declined, it can give you the time and insight you need to improve your Credit Report, and increase your chances of getting a mortgage next time.
If you really want to improve your chances of getting accepted for a mortgage - then get in touch with our expert mortgage broker team at TaylorMade.
