AIP before offer

Plus

A few stupid FTB questions about agreements in principle:

I'm thinking about applying for an AIP before finding a suitable property, partly to make a more attractive offer and also because rates are rising.

1. Is this sensible?

2. If I get an AIP, how much can I vary the conditions? If I apply to borrow £X on an LTV of Y%, is it OK to:
a) increase the value of the property (ie reduce the LTV keeping the borrowing the same)
b) reduce the borrowing amount (ie keep the LTV the same)
c) both reduce the LTV and the borrowing amount
d) increase the borrowing amount without crossing an LTV boundary (assuming I'm still within affordability calculations)

I assume I'll be in trouble if I push over an LTV boundary of a particular product, but will that mean they just need to change the rate or would it invalidate the whole AIP? The question here is I'm at about 50% LTV. If I apply for an AIP for a deal with a 50% LTV but then my offer ends up being 51%, is it usual for the provider to move the AIP to another deal (here a 65% LTV with a 0.1% increase in mortgage rate), or would I have to start again? Assuming I meet affordability on both of course.

GoingOn30

Getting an AIP does not guarantee you a mortgage rate, you can only "lock in" to a rate once you've had a full mortgage application accepted.
There is no point in getting an AIP until you've found a property you want to offer on. You can get one at that point if you want to make your offer more attractive.

ACG

1) I try to avoid giving my customers AIPs until they are ready to apply. The reasons being, the best lender today, may not be tomorrow. Rates/Criteria change. They do expire after around a month. Some AIPs show how much you can lend. If you give this to an agent and evidence of deposit, they know how much you can afford when negotiating the purchase price.

2) An AIP is for whatever you ask for. It becomes invalid if you change anything, although general rule of thumb is if the LTV goes down and the loan amount does, then you are not going to have any major problems. But an AIP in general is not worth the paper it is printed on.

As has been mentioned, an AIP does not usually secure any rate.

amnblog

As ACG says AIPs have become less relevant.


That is the view of the majority of sensible Brokers (who after all are the people arranging most of the mortgages in the UK).


Estate Agents still commonly ask to see AIP's (possibly to have their Client feel they are doing something to vet potential purchasers)


Lender's still offer AIP's both through Brokers and direct to potential borrowers via the Internet, telephone, and Branch.


They are mainly a way for these parties to feel there is some kind of evidence that a mortgage offer will be forthcoming, but the world has changed.


When AIPs became common place, initial decisions were often the crux of the application as Lender's commonly did not ask for Bank Statements or proof of income. Decisions were based on risk assessment and supporting information requests followed. The 'full application' process was primarily about the valuation.


In today's market, proof of income is a standard requirement, and bank statements a standard request. The credit scoring of an AIP is just a small step in the overall decision.


Hence the view of Brokers like ACG and myself is that an AIP is part of the process once a target purchase has been identified.


It should be undertaken off the back of sight of the credit files, income proof, and bank activity, as a minimum.


Many borrowers still complete AIP forms with Lenders online without consideration of the supporting documentation. Many Brokers still run AIP forms through certain lenders without sight of supporting documentation. Both groups have no idea what they are doing.