Most lenders search for “hard” credit before offering you an agreement in principle that leaves traces in your credit file. You don`t need to go through the full application process to get an agreement in principle. This will come later if you have accepted an offer on a property. You may be rejected if you apply for a mortgage in principle, which can affect your creditworthiness. You may be wondering why, in principle, you could first commit to a mortgage instead of just asking for a real mortgage. The simple answer is that it`s faster and less effort to get a mortgage in principle. You can often get a sort in less than an hour if there is no problem, and at most it should only take a few days. This frees you up to go home hunting in seriously, so you are able to make a fixed offer for a home that you make like the look of. Make sure you get advice on products and lenders before pursuing an agreement in principle, as you can leave a soft or hard footprint in your credit file.
If you have an agreement in principle and decide to make a full application with that lender, you must provide more detailed personal data. The lender is not required to lend you the full amount indicated in the AIP. When we surveyed more than 3,000 homeowners in July 2019, 53% said they had an agreement in principle before applying for their mortgage. About 25% said they didn`t know or didn`t remember having one, and only 25% said they didn`t. The objective of an agreement in principle is to give the mortgage lender a timely guarantee of its loan will. It is a matter of establishing hard facts about the applicant`s personal circumstances. Once you have your agreement in principle, you can see real estate within your specific price range; that is, the amount you could possibly borrow, plus each deposit you may have saved. A wholesale mortgage is exactly what it looks like — an indication of what a lender can actually borrow.
It remains conditional on you being able to meet the mortgage criteria in practice, and is not a promise or guarantee. A policy decision shows that one can theoretically afford to buy a property. This could make you a more attractive buyer and set you apart from other potential buyers. Some lenders will give you a certificate if they offer in principle a mortgage that can be useful to show real estate agents. What this entails differs depending on the lender, but could be a) an explanation that they are willing to lend the amount requested for b) the maximum amount they may be willing to lend, or c) simply a statement that your mortgage was accepted in principle. To confuse matters, mortgage lenders refer to the initial mortgage decision-making procedure, either by the term “agreement in principle (AIP)” or “decision in principle” (DIP). A mortgage in principle – also known as the Agreement in Principle (AIP) or decision-in-principle (DIP) – is a written indication from a bank or real estate credit company (the lender) that indicates the amount it might be willing to grant you. It`s not binding (they could always deny you a mortgage on these terms), but it`s a very useful indicator of what you can probably borrow, and real estate agents take them seriously. Realtors will often want to make sure that you will be able to get a mortgage on a property before making an offer, so it may be helpful to have an agreement until that date.
You don`t need to get an agreement in principle, but it can sometimes help if you`re very handsome (see “How an AIP Can Help,” below). To reach an agreement in principle, you must contact a mortgage lender directly or through a mortgage broker.