Mortgage declined after agreement in principle (AIP)

In this guide, you’ll learn why mortgage applications get declined after an agreement in principle (AIP) has been given the go-ahead and what you can do about it.

This guide covers:

• What an AIP is
• Why you can still get rejected after receiving one
• What you can do to get approved

Mortgage rejections are common at this stage

Giving yourself a hard time won’t help and trying to guess why you were rejected won’t either. If your mortgage application has been declined after you had an agreement in principle then don’t panic, there may still be an alternative option elsewhere.

So many people experience rejection after this stage in the mortgage process but knowing that every lender is different and that there could still be hope, might help you to re-evaluate the situation. You might even be able to find a better deal - so sit tight and look at your options before hastily reapplying to the same lender, or at all.

We’re here for you if you have questions but this guide should give you the information you need to move forward.

What is an agreement in principle (AIP)?

Also known as a decision in principle (DIP), an AIP is a provisional agreement between you and a lender that gives you an understanding of how much you may be able to borrow towards the purchase or a remortgage of a property. An AIP establishes the primary details in the mortgage contract so both you and your lender are clear on what the agreement will entail and require from both parties

Why has my lender declined me after giving me a DIP?

It’s essential to remember that an agreement in principle is not a guarantee that the lender will approve your mortgage application.

Your lender might have briefly checked your eligibility and pre-qualified you for a certain amount based on the details you provided

However, an AIP isn’t an official mortgage offer and in some circumstances, a mortgage application may be declined later down the line once more in-depth checks have been performed.

That’s why it’s important to double-check the information on your initial application. You want to avoid any confusion or query from your chosen lender that you’re a high-risk borrower but if you are, it’s still important to be honest because mistakes will only waste your money and time

Be upfront about any credit history blips, debt or gaps in income, so you can filter out the lenders that won’t lend to you and apply to one with criteria you do meet.

What to do if you’ve been declined by a specific lender

We’ve listed specific guides below that might be useful but if your lender isn’t listed, we probably just haven’t gotten round to writing the guide yet! You can still get the answers you need via our online chat or a good old fashioned phone call.

• Halifax
• Natwest
• Santander
• Nationwide
• HSBC
• Skipton
• Leeds Building Society

Common reasons for a mortgage being declined at this stage

If your mortgage is declined after an AIP has been given, it might be because the mortgage underwriter has found some information about you that suggests to them that you present a greater risk to them, for defaulting on your mortgage agreement.

It could be something as simple as incorrect information, a spelling mistake or something more serious such as a change in income. With lenders so focused on preventing fraud, discrepancies such as this can make them nervous.

There are many reasons why an application is rejected at this stage, and our expert mortgage advisors deal with this situation on a regular basis and will give you bespoke advice on how you can turn the no into a yes, speak with one of our friendly advisors today.

Your income is less or more

Your income is just one factor that lenders look at to work out if you’re a good candidate for their mortgage product. They want to make sure that you have the financial means to meet your end of the agreement i.e. repay the capital and interest balance of your mortgage within the specified mortgage term.

So, if your income is different to what’s on your application, your mortgage application may be declined with your chosen lender now requiring additional proof or even a re-application before they’ll lend to you. Always declare a change in income because lenders can also suspect fraud if your finances aren’t what you said they were.

Recently changing your job

The length of time you’ve been in your current role is an indication of the stability of your income. If you’ve recently changed jobs some lenders will see this as a potential red flag and will get cold feet.

That’s not to say it’s impossible to get a mortgage after a change of jobs or even career, however, having a steady record of regular income from an employer or regular work, can suggest financial stability i.e., you’re more likely to keep up with your mortgage repayments.

Your deposit source isn’t suitable

Failing a final credit check

Before a full mortgage offer is made, lenders will often perform a more thorough credit check. If something comes up on this credit check which wasn’t initially noticed it could result in an application being rejected because you no longer meet the criteria of the lender.

There’s a lot of information on your credit reports and there are a few places that provide them so be prepared for your information to vary when you check yours. That’s the problem that lots of people face when applying for a mortgage - they don’t know that they have issues with their credit because they’ve either never looked, or there are differences between their reports.

Too many credit applications

If you’ve applied for other forms of credit such as credit cards and car loans this could affect your mortgage application, especially if you’ve applied for lots of lenders for various sources of credit. When performing the initial affordability checks for your agreement in principle, your full credit history is checked by the lender. However, with new credit comes new outgoings and this could affect your debt-to-income ratio and therefore your affordability for a mortgage.

Missed payments and arrears

If for any reason you’ve missed a payment on a credit account such as a credit card or a loan repayment this can be detrimental to your mortgage application. Lenders prefer to see stability and recent missed payment indicates you could be overstretching yourself financially. The extra risk of lending to someone who might be struggling to repay their financial obligations, exposes a lender to risk of loss

Knowing what’s on your report can help you dismiss the lenders that you’re ineligible for, leaving you with realistic options. Before you make an application again, check your credit reports, correct any out of date information and if you have the time, improve your score.

Improve your credit score before you apply again

Credit reports that indicate careful borrowing and regular repayments are more likely to achieve a better credit score. While lenders don’t set minimum credit scores for their applications, a higher score suggests a more trustworthy borrower and can improve your overall affordability, helping you to be eligible for deals with cheaper interest rates and potentially more flexible terms and conditions

Here are a few ways you can help to improve your appeal as a borrower

• Paying your bills on time and in full
• Repaying money owed for credit agreements i.e. car finance, credit cards, buy-now-pay-later schemes
• Increasing your credit limit - increasing the amount of available credit you have but NOT spending it, suggests that you can manage money, however, it’s not always advisable to make credit applications ahead of making a reapplication for a mortgage. Get advice from a financial advisor before making a decision on increasing your available credit, especially if you’ve recently been declined for a mortgage after getting an agreement in principle.
• Lowering your credit utilisation - this is the amount you borrow as a percentage of the amount of credit available to you. So, if you’ve got an overdraft of £2,000, you might aim to borrow as little as possible from that pot, with some lenders requiring their borrowers to use less than 50% of their available credit.
• Prove where you live. Register on the electoral roll at your current address to help lenders confirm that you are who you are

What to do next

t’s important to remember that while it’s frustrating having a mortgage application declined at this stage, it’s also fairly common, and there are plenty of options still available to get your mortgage secured

The good news is, you can still get a mortgage approved! Having an application declined at this stage is not the end of the road, as mentioned before it just means you’ve not been matched with the correct lender

Hold your horses!

The last thing you want to happen at this stage is to rush into another application which could result in a second rejection on your credit report. It’s important that you are matched with a lender that suits your individual circumstances to maximise the chances of approval

Ask an expert to find you the best lender

Our expert mortgage team is the quickest way for you to be accepted for a mortgage after being rejected at any stage of the process. Their expertise will help you understand why you’ve been rejected in the first place, how to fix it as well as find you a lender who understands your circumstances which will prevent any further setbacks and stress.

Relax - no, really…

If you’ve decided to ask for help and you’re working with a reviewed mortgage broker, let them sort it out. Give them accurate information, let them know what you want and then delegate the task to them. That’s the beauty of working with a mortgage broker, they deal with all the searching, comparing and checking contracts.

They’ll find the right lender with an agreement that you’re likely to get approved from based on their eligibility criteria and your circumstances i.e. your income, age, debt, credit history and the type of property you want to buy. It’s their job to help you avoid a mortgage rejection and get the money you need to buy or remortgage a property

FAQs

What’s the difference between an agreement in principle and a mortgage application?

An AIP isn’t the final mortgage application. When you approach a mortgage lender, they agree to lend you a certain amount of money based on some preliminary checks, under the condition that you pass further eligibility checks and a credit check. They might look at your gross income to calculate how much they can lend you to buy a property

Most use income multiples of 4.5, so if your gross income is £20,000, you might expect to borrow £90,000 because 4.5 x £20,000 is £90,000

This lets you know how big a budget you have to play with and having an agreement in principle can suggest to sellers and letting agents that you’re in a realistic position to buy.

However, an AIP is not a mortgage approval, that comes later in the process, once your lender has carried out deeper credit checks, potentially income stress tests and a mortgage surveyor has confirmed that your chosen property is valued at what you’re offering for it.

If I get declined after receiving a decision in principle, do I have to reapply all over again?

Most likely yes, which is frustrating but necessary so that either the same lender, or a new one with a different deal, have all the relevant information necessary to make an informed decision.

If you’ve recently applied for a mortgage, you’ll know that providing the documents necessary to apply for a mortgage isn’t the time-sucking chore it used to be. Most documents are uploaded digitally and if you work with a mortgage broker, they’ll check your eligibility beforehand, as well as proofread your mortgage application to help you avoid any delays caused by typos or mistakes