Receiving an Agreement in Principle (AIP) from a lender is an encouraging step for prospective homebuyers, as it demonstrates a preliminary willingness to offer a mortgage based on an initial assessment of your financial situation. However, an AIP is not a guarantee of final mortgage approval. Mortgages can still be declined after an AIP for various reasons, ranging from changes in financial circumstances to issues discovered during the lender’s full review process.
This article explores common reasons for mortgage declines after an AIP, provides steps to take if your mortgage is denied, and explains how Fraser Bond can assist in strengthening your reapplication.
An Agreement in Principle, also called a Decision in Principle or Mortgage in Principle, is a provisional document issued by a lender that estimates how much you might be able to borrow based on an initial credit and financial assessment. While an AIP can make you a more appealing buyer by showing sellers and agents that you’re serious, it does not guarantee final mortgage approval. The full application process is more thorough and can uncover additional factors that lead a lender to deny the loan.
Changes in Financial Circumstances Any change in your employment status, income level, or monthly outgoings between the time of receiving your AIP and submitting the full mortgage application can affect your eligibility. For instance, if you take on new debt, switch to a lower-paying job, or experience a reduction in income, it can impact your affordability rating and lead to a decline.
Issues with the Property’s Valuation During the full application process, lenders conduct a property valuation to ensure the home’s value aligns with the loan amount. If the property is deemed overvalued or has structural issues, the lender might either reduce the loan amount or reject the application altogether.
Fraser Bond’s Support: Our advisors can assist in identifying any potential valuation issues early on and guide you through securing alternative options, including working with valuers to clarify property concerns.
Detailed Credit Check Findings Although an AIP is often based on a “soft” credit check, the full mortgage application will involve a more detailed, “hard” credit inquiry. This can reveal issues such as missed payments, high debt balances, or recent credit activity that might raise red flags for lenders.
How Fraser Bond Helps: Our team reviews your credit report with you before you apply, helping to identify and address any areas that could potentially impact the lender’s assessment.
Inaccurate or Incomplete Documentation Providing incorrect or incomplete information during your initial application can lead to discrepancies during the final review. Lenders require accurate income verification, identity checks, and proof of funds, and any missing or conflicting details may result in a rejection.
Affordability Assessment Adjustments Lenders assess affordability based on their own criteria, taking into account your current debt, monthly expenditures, and income stability. If you have any additional financial commitments that were not included in the AIP assessment, they can impact the lender’s final affordability review and lead to a denial.
Fraser Bond’s Expertise: We work with you to assess your financial profile thoroughly, helping ensure that all aspects meet the lender’s affordability requirements before the final application.
Unstable Employment History or Self-Employment Complications Self-employed applicants or those with irregular income streams may face extra scrutiny. Lenders prefer a steady employment history, and applicants with inconsistent or complex income patterns might need additional documentation to verify income stability.
Fraser Bond’s Guidance: We assist clients in gathering the necessary financial records and preparing comprehensive documentation, improving the chances of acceptance for those with less conventional employment backgrounds.
Lenders are required to provide reasons for declining a mortgage application, so be sure to ask for a detailed explanation. This will give you insights into the specific areas that need improvement, whether they relate to income, credit score, or the property itself.
Once you understand the decline reason, focus on areas of improvement. If credit issues were the primary concern, work on paying down debt, making timely payments, and avoiding new credit inquiries for several months before reapplying.
If affordability was an issue, consider reassessing your budget. You might choose to look at lower-priced properties or reduce the loan amount to increase your approval chances.
Fraser Bond’s Support: We help clients re-evaluate their options, exploring alternative financing structures and property choices that align with the lender’s affordability assessments.
Mortgage brokers, like Fraser Bond, are experienced in working with various lenders and can help identify those more likely to approve applicants with unique circumstances. A broker can also re-evaluate your profile and find lenders with flexible criteria that might be better suited to your financial situation.
If traditional lenders have declined your application, a specialist or non-mainstream lender may be an option. Specialist lenders often cater to clients with credit issues, self-employment income, or complex income profiles and may provide more flexibility.
Fraser Bond offers comprehensive support to clients throughout the mortgage application journey. If you’ve been declined after receiving an AIP, our team can assess your financial profile, help identify areas for improvement, and guide you through a reapplication strategy. By leveraging our network of lenders and deep market expertise, we work to find flexible solutions that align with your goals and financial circumstances.
Whether you’re a first-time buyer, a self-employed applicant, or a homeowner looking to remortgage, Fraser Bond can help simplify the process, ensuring that you have the support and insight needed to strengthen your mortgage application and ultimately secure the right loan for your needs.
