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. 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. The purchase price of a property is legally binding only after the exchange of contracts. This means that sellers can choose to increase their price at any time, whether they know what you can afford or not. Nevertheless, you can still haggle over the price using our home buying tips. To reach an agreement in principle, you must contact a mortgage lender directly or through a mortgage broker. There is usually no fees from a lender or broker for a mortgage in principle. Normally, a mortgage broker will only charge once your mortgage is secured (and sometimes not even then – you`ll know more about how mortgage brokers calculate). 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. It`s a wonderful feeling to get a mortgage in principle agreed (AIP), as it brings you a little closer to the fall of your new home. Unfortunately, this feeling does not always last long for a number of people, as mortgages can always be refused as a result of an agreement in principle. A mortgage in principle can also save time in the purchase process, both in terms of accepting your offer and speeding up the mortgage application process. A mortgage in principle is an official estimate of how much you can afford to borrow on a mortgage. This can be a very useful thing if you are looking for a first home (or a second lot) because it shows the realtor that you are a serious buyer and that any offer you make is realistic. 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 can normally last between 60 and 90 days, depending on the lender. If you have not found a property or accepted an offer during this period, you may need to receive another one. Renewal should be easy, unless your circumstances (or economy) have changed significantly.
Once you have decided to start the house hunting seriously, you are in principle asking for a mortgage. Apart from its practical applications, it will help you focus on and engage in your task. Knowing what you can afford, even in theory, gives a huge boost to trust. Even if it is not a full mortgage application, you must still provide information to obtain an agreement in principle.