Usefulness (or not) of AIPs

Vyncenze

Been reading a lot on this forum recently and one of the biggest topics seems to be people applying for AIPs and being accepted, then getting turned down at full application.

I understand the basic reasoning behind this (banks trying to "hook" customers combined with lack of credit scoring at AIP stage) but is there a reliable AIP-type process out there, or is this where brokers really come into their own?

What I'm getting it is: do any of the banks have a detailed AIP which gives a reliable (even if not 100%) indication of whether a full app will be accepted or not? I've found the Nationwide one and am tempted to complete it (even though I don't want to use Nationwide as a lender!) but it isn't clear if the credit check they complete will leave a trace and therefore potentially cause a problem when I apply for real.

Just seems a bit crazy that buyers have to put themselves in the position of having an accepted offer on a property before they can even find out if they're going to be able to get a mortgage! Why can't banks offer formally subject to valuation (we will lend you x amount at y rate - now go find your house...)?

What am I missing?

paulmapp8306

An AIP generally does not include a credit check (though some do a soft search). Its basically a guide that IF the information you give about income and outgoings can be substantiated, AND you have no issues on your credit file, AND the house in question is valued by them at the same value (or more) than you said THEN you would be accepted or the mortgage you seek (ammount lent on a certain house value with a certain deposit).

If any of these things differ, then a full mortgage app may nor be granted. Basically be up front, and mention anything that may effect things down the line (ie a missed payment/arrears on your credit file, if your income is from a permanant job or contract, how long you have been in that job etc).

I applied for an AIP as I didnt hink Id get a mortgage (I was on a debt management plan from 10 years ago - with still a year to go but due to leaving the forces needed a house for the family - it was buy or rent. We wanted to buy but didnt think we would be able to due to our history - thought it wouldnt hurt to try). I was granted an AIP - and actually competed a couple of weeks ago with no issues.

Ultimately if you dont get an AIP you wont get a mortgage - so why go though the ups and downs of finding somewhere then not getting it. If you DO get an AIP, and youve been accurate with the information - you SHOULD get a mortgage (even if ultimately its not with the lender you have the AIP with). think of it as reasurance you have a decent chance rather than a gurentee of a mortgage.

paulmapp8306

Oh - any credit checks carried out for an AIP will be soft checks - and wont leave a permanant trace. A Full mortgage app will.

vectistim

When I was doing the mortgages I was always rather cynical about AIPs, but if someone _really_ wanted one I would provide a homemade one that was so full of disclaimers as to be useless, something along the lines of:

Based on the information provide on nth day, and based on published mortgage criteria on nth day it should be possible to achieve mortgage funding up to £y.
This is not a guarantee of lending, criteria change, the value of your home may go down as well as up, your body may be repossessed if you do not keep up repayments on a loan secured on it, the Crimson Permanent Assurance is regulated by . . . etc.

Vyncenze

Thanks Paul. I have completed several AIPs and they have all "accepted" us (we have a pretty straightforward application, both in full time employment, no bonuses etc, no adverse credit). What I'm getting at is that it seems to me it would be helpful if the next stage was a full application which would be granted *subject to valuation* - so the buyer could then merrily go about the viewing/offering process safe in the knowledge that as long as they didn't pick a "dud" they're going to get the loan. It would also help on the budget front - if the bank checked a full application and said "we're prepared to lend you x at rate y as long as you have your 15% deposit" then it wouldn't tempt people into offers which take them outside the lending criteria.

Just all seems a little back-to-front to me.

vectistim

I believe you can get close to that for auctions.

However, to do it generally would require some time limitation so you would need to keep updating your application to ensure it remained valid and would require more work (and cost) for the lender in having to carry out more thorough checks at an earlier stage when the commitment to buy is markedly less.

I don't see why a 'based on the facts provided you should be good for £x' isn't sufficient.

Vyncenze

vectistim wrote: »

I don't see why a 'based on the facts provided you should be good for £x' isn't sufficient.

Quite possibly it should be. But most of the AIPs don't ask for much detail, so I imagine that the things people trip up on at full application haven't even been mentioned at AIP stage. It means it's still a bit of a guessing game, as evidenced by the numerous "got AIP but failed at full app " threads on this board.

I take your point about the extra work for the lender though.

vectistim

In those cases where it goes wrong its normally due to some element of non-disclosure at the beginning.
My approach was to do a full fact-find to get all this information before producing my homemade AIP.

An important part of that was digging down into what someone actually meant when they said their salary was, say £25,000 and with a bit of probing it would turn out that their basic salary was £15,000 an annual bonus of £2,000 overtime of £7,000 and commission of £3,000. Similarly, asking someone if they have any CCJs or defaults is often an insufficient question to get to the truth.

If you have a stack of AIPs and a straightforward provable financial history then relax, be happy, and go and find the house that you want.

JPB123

paulmapp8306 wrote: »

Oh - any credit checks carried out for an AIP will be soft checks - and wont leave a permanant trace. A Full mortgage app will.

There are only a few lenders that leave a soft footprint. Amongst others, Abbey, Nationwide, Woolwich, NatWest/RBS all do recordable searches.

I am an Independent Mortgage Adviser

You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.

missamyx

This question has probably been asked loads on the forum but.... We've had a AIP from nationwide and now had an offer accepted on the property. Nationwide done the credit check on both of us at the time of the AIP. Question is, I have 3 late payments in total on my credit score 2 from 2008 store card which cleared in 2009 and a late payment on a credit card in 2009 which was also cleared that year. Would that show up at the time of the search or is there a chance they may still decline us at full app? Going to them tomorrow to start the full app and stressing is an understatement!