Declined Agreement in Principle First-Time Buyer

Is there anything I can do to clarify or correct to improve my application?

It depends on why the AIP was declined. If the problem was affordability, it is not worth reapplying straight away as nothing will have changed. In this case, you could look to decrease your existing borrowing or commitments, or increase your pay, perhaps by taking another job or asking for a pay rise.

If the issue was poor credit, the best thing to do is maintain good financial habits for a period of time and repay those debts, which makes you look better to the lender and more likely to have your AIP accepted.

Would the decline be based on a lender’s specific lending criteria?

Yes. The decision to lend is based solely on the lender’s appetite for risk, which is governed by their lending policies and enforced by their underwriting teams. The criteria moves depending on their appetite for risk at the time.

While a lot of criteria across different lenders are fairly similar – especially the basics around credit history and deposit size – there are hundreds of variables that can be difficult to follow. Knowing which lender to approach is key to hopefully getting an AIP accepted, which is a very good reason to use a broker.

Are lenders more flexible with first-time buyers?

Yes, it is fair to say that lenders are more flexible with first-time buyers now. There are definitely more special offers available that many other borrowers do not have access to.

For example, some lenders will allow first-time buyers to borrow up to seven times their income. Many lenders have products that require a much smaller deposit, and some have launched mortgages where you do not need a deposit at all, as long as you can prove a rental payment history. This means there is definitely more flexibility out there.

What steps can I take now to strengthen a future AIP application? Would it help if I saved a larger deposit?

Anything you can do to improve the key factors – your income, your deposit, aiming for a smaller loan size, and your credit history – will definitely lead to a better chance of your Agreement in Principle getting approved.

If you want to improve your credit history, we recommend using systems like Check My File, which generate your credit report across all the different credit agencies so you can monitor where you can improve. For advice, talk to a broker who can tell you what criteria lenders are looking for.

Should I consider a guarantor or joint application?

If you think you will struggle to meet the basic lending criteria, especially around how much you earn or are looking to borrow, then a joint application could definitely be an option for you.

The only thing to remember is that it is a big commitment to ask someone to go on the mortgage with you. There are options where they do not own the property but are equally liable for the mortgage, so approach it carefully. As a broker, we are always happy to speak to the joint borrower and explain what it means for them so that everyone is well-informed and can hopefully make a better decision.

Can I reapply soon, or is there a waiting period?

It really depends on why you were declined. If it was an issue with your credit score that you could prove was a blip or an issue with the credit file, then potentially it could be justifiable and worth applying again.

However, if it was something like your affordability or your income, it is not going to change by simply reapplying, unless you seek new employment or find a way to increase that income.

Can you suggest any tools or calculators to help first-time buyers understand affordability?

Many of the major lenders have these tools generally available on their websites. However, to be completely truthful, they only help with the basics of affordability. They do not necessarily give an accurate picture of whether an AIP will be approved, as they do not factor in the specifics of your situation.

For example, if you input what you earn but the tool does not know you are on a fixed contract, the result does not mean your AIP is going to be approved. This is another time when it may be worth speaking to a broker so they can help run through some options with you.

How can a mortgage broker help? Is there anything else to add?

Our job as brokers is to ensure we understand everything about mortgages at the time you are applying. Our commitment to you is that we will look for lenders that suit your situation. We will not apply for anything unless we are fairly certain it is going to pass.

Generally, we are there to talk you through the process and make it as easy as possible. We are here purely to help you understand and make an informed decision, because it is a large commitment.

Summary

Getting an Agreement in Principle (AIP) declined can happen for many first-time buyers, but it is not the end of your property journey. Declines are typically due to factors like income, deposit size, or credit history. Lenders have specific criteria based on their risk appetite, and these criteria can change.

Key Points

• A decline is usually down to one of the following key factors: income, deposit size, or credit history.
• Lack of borrowing history can negatively impact your credit score, but many lenders are now offering more flexibility to first-time buyers.
• Employment status, especially being on a contract or in a probation period, can be a concern for lenders seeking income stability.
• If declined, you should get an explanation from the lender. Reapplying immediately is only useful if the issue was a credit file blip, not affordability, which requires changing your financial circumstances first (like increasing income or decreasing commitments).
• Lenders are showing more flexibility towards first-time buyers with special offers, including higher borrowing limits or low/zero-deposit options based on rental history.
• A mortgage broker is crucial as they understand specific lender criteria, vet your application information, and will only submit an application they are fairly certain will pass.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP TO DATE WITH YOUR MORTGAGE REPAYMENTS.  

A fee may be payable if we progress your application. Our average fee is around £200, and the maximum you may pay is £595 for bridging loans or adverse credit mortgages.

Mortgage Style Limited, trading as Mortgage Style, is an appointed representative of HLPartnership Limited, which is authorised and regulated by the Financial Conduct Authority.