An agreement in principle — also called a decision in principle or a mortgage in principle — is a lender’s indication that it would be prepared to lend you a certain amount, based on the information you have given and its initial checks. In the Scottish market, where popular properties often go to a closing date, it is one of the most practical steps a first-time buyer can take. It is also one of the most misunderstood, because it sounds more final than it is.
Looking for advice on your own situation rather than the general picture? Our first time buyer mortgage advice page is the place to start, or you can talk it through with an adviser using the form below.
What an agreement in principle actually is
An agreement in principle is based on a summary of your income, commitments and circumstances, and usually a credit check. It tells you roughly how much a lender may be willing to lend, and it gives selling agents some reassurance that you have looked at your finances.
It is not a mortgage offer. No property has been valued, your documents have not been checked in full and the lender has not completed its underwriting. All of that happens after you apply for a mortgage on a specific property.
When to get one
The useful time is before you start viewing seriously — once you have a realistic idea of your deposit and the sort of price you are aiming for, but before you are about to bid. Get one too early and it may lapse before you need it; leave it until you have found a property and you can find yourself working against a closing date.
- Before viewing seriously — so your price range is based on what a lender has indicated rather than on guesswork.
- Before noting interest — so you are ready to act if the selling agent sets a closing date.
- After anything that changes your finances — a new job, a change in pay, new credit or a change in your deposit can mean the figure needs to be looked at again.
An agreement in principle is usually valid for a limited period set by the lender. If your search takes longer than that, it may need to be renewed.
Notes of interest and closing dates
When you are interested in a property, a note of interest is usually registered with the selling agent through your solicitor. That normally means you will be told if a closing date is set — the deadline by which written offers have to be submitted.
Closing dates can be set at short notice. Having an agreement in principle already in place means that time can go on a second viewing, legal advice and deciding what to offer, rather than on starting the mortgage process from scratch.
As mygov.scot explains, most Scottish properties are sold through a blind bidding system, with offers invited over or around a stated price. Before deciding how much to offer, it is worth understanding how the Home Report valuation affects what you can borrow — we explain this in our guide to Home Report value and offers over.
What it does not guarantee
An agreement in principle is not a promise to lend. The full application can still be declined, or approved for a different amount, for a number of reasons:
- The property — the lender’s valuation may be lower than the price, or the property may not meet its lending criteria.
- Your documents — payslips, bank statements and other evidence have to support what was declared.
- Your circumstances — a change in income, employment or commitments after the agreement in principle can change the outcome.
- Lender criteria — lenders change their criteria and products, sometimes at short notice, and an agreement in principle does not secure a rate.
That is why it is better treated as a strong indication than as a commitment — and why disclosing everything accurately at the start matters.
Credit checks at this stage
Lenders use different types of credit search at the agreement in principle stage. Some use a search that is not visible to other lenders; others use one that is. Making several applications to different lenders in a short period, particularly where the searches are visible, can affect how you are viewed.
It is worth checking your credit report before you apply, so that anything unexpected can be dealt with first. If you have had credit problems in the past, our guide to first-time buyer mortgages with bad credit covers what lenders may look at.
What you will usually be asked for
The information requested varies between lenders, but you will normally be asked about:
- Income — your employment, salary and any regular additional income.
- Commitments — loans, credit cards, car finance, student loan repayments and regular outgoings.
- Deposit — how much you have and where it comes from, including any gift from family.
- Personal details — your address history, and details of anyone buying with you.
If some of your deposit is coming from family, our guide to gifted deposits in Scotland explains what lenders and solicitors are likely to ask for.
How we can help
We can look at your circumstances, explain which lenders may be suitable, and arrange an agreement in principle where it is appropriate. Our first-time buyer mortgage advice page sets out how we help through the whole Scottish buying process.
Common questions
This guide is general information, not regulated financial advice, and reflects our understanding of the rules at the date shown. Tax treatment depends on individual circumstances and may change. Your home may be repossessed if you do not keep up repayments on your mortgage. Not all buy to let mortgages are regulated by the Financial Conduct Authority.