Views from a mortgage broker: the dreaded AIP

Stuart Wallace | Express Funding
31st July 2020
Stuart Wallace Express Funding
"We all need to take a step back and remind ourselves what the AIP is and actually what the value of it is in the first place."

As brokers, we all know how the estate agents and media have promoted the idea that buyers must have an agreement in principle (AIP) to be treated as a serious buyer.

But since the Covid situation started it has been taken to further extremes with certain national chains of estate agents even refusing to allow prospective buyers to view a property if they did not have an AIP.

On top of this we now have lenders not issuing an AIP automatically as they are insisting they need to run it past an underwriter before they can give an answer as accept or decline (surely this should be at full app!).

We all need to take a step back and remind ourselves what the AIP is and actually what the value of it is in the first place. In my opinion, the AIP evolved from the corporate estate agency environment as a way of the in-house mortgage adviser trying to tie the house buyers to the adviser in the estate agents (I know - I did it nearly 20 years ago!). It was a basic credit check and affordability check in one, admittedly it did give certain clients more confidence knowing that a lender had checked them out so to speak, but it was a basic check, and only at full application would the full decision be made like now.

Over the years the AIP systems of lenders have got more and more bloated and complicated to the point now with some lenders the AIP is not far off 90% of the full application. I appreciate brokers want reliability in an AIP but realistically if you have the correct proofs and have done the affordability correctly, the full application should not disappoint regardless of how in depth the initial AIP is.

I appreciate that with some clients gaining an AIP is sensible to do, but then there are a number where as long as credit files etc. have been checked the need for an AIP is not necessary. Why, if I have the choice of many lenders for a client, do I need to get for an estate agent a piece of paper from one lender which a week later may have an inferior rate to another?

How many times do we have to drop everything as a client needs an AIP for an estate agent to make an offer? As brokers and lenders we have jumped to the tune of the estate agents and I feel it is time we stop and all remember that an AIP is exactly that – just an agreement in principle, and nothing is certain until the full application is submitted. An AIP is as good as the information that has been input so we all know that potentially an AIP is worthless if done incorrectly.

Lenders - stop worrying about the extra underwriting that may or may not be required due to Covid but give us a sensible automated AIP and maybe add a Covid basic requirements item to the normal list of requirements? We do not need the AIP to be the full application – we need a quick check that the credit file is acceptable and that the affordability is ok as we all know how different certain clients commitments can be?

My message: Stop trying to underwrite the case before the full application is submitted.

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