The important thing is that not all mortgage principles are the same. So be warned and they can give you a misguided sense of security. Make sure you understand the scope of validation using the lender`s underwriting policy and that it has included a credit check. However, this is not a mortgage offer. Once you have found the property you want to buy and an offer has been accepted, you still need to apply for a full mortgage. Our mortgage advisors use the information you have already provided to provide the AIP for the complete application as long as the details are accurate. To reach an agreement in principle, you must contact a mortgage lender, either directly or through a mortgage broker. If you have an agreement in principle and decide to make a full application to this lender, you must provide more detailed personal information. The lender is not required to lend you the full amount described in the AIP.
Many real estate agents (and sellers) will only take you seriously if you have an AIP. You don`t need to get an agreement in principle, but it can sometimes help when you`re looking for a home (see „How an AIP can help,“ below). You can complete the entire process online – it basicy only takes about 15 minutes to get a mortgage. Filling out the online forms with some lenders can even make you an immediate offer. It may take longer if you do it over the phone or in the store. The purpose of an agreement in principle is to give the lender an initial and timely guarantee of its willingness to lend. It is about communicating solid facts about the applicant`s personal circumstances. It`s also useful if you`re thinking about a repayment and want to find out how much more you can possibly borrow based on the equity you already have in your home. An agreement in principle, also known as a „decision in principle,“ „promise of mortgages,“ or „mortgage in principle,“ is a certificate or statement from a lender that states that they would lend you a certain amount „in principle.“ In principle, a mortgage is not a formal mortgage offer, nor is it guaranteed that the lender will grant you a mortgage in the future. If you re-perform, this information will be less necessary, so you would submit an agreement in principle once you have chosen a lender and a product. Real estate agents will often want to make sure you`ll be able to get a mortgage on a property before making an offer, so it can be helpful to have an agreement by that date.
Most lenders do a „hard“ credit search before offering you an agreement in principle that leaves a trace in your credit report. A decision of principle shows that one can theoretically afford to buy a property. This could make you a more attractive buyer and pull you away from other potential buyers. One thing you need to keep in mind is that an AIP can affect your credit injuries. A credit quality check must be performed to complete the AIP. When a „rigorous test“ is performed, it leaves a „footprint“ in your creditworthiness. In other words, if you apply for multiple AIPs in a short period of time, it can have a negative impact on your credit quality.