December 19

Understanding Agreement In Principle

To reach an agreement in principle, you must contact a mortgage lender directly or through a mortgage broker. 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. 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 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. 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. Even if it is not a full mortgage application, you must still provide information to obtain an agreement in principle. Most lenders search for “hard” credit before offering you an agreement in principle that leaves traces in your credit file. If you remortgaging, there is less need for this information, so you would file an agreement in principle once you have chosen a lender and a product.

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. 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 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 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. If you have had credit problems in the past or have a limited credit history and are not sure what a bank or construction credit union might lend you, an agreement in principle could give you extra security from your credit perspective. 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.

You can complete the entire process online – it should in principle only take about 15 minutes to get a mortgage. Filling out 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. A mortgage is in principle also known as a policy decision (DIP), agreement-in-principle (AIP) or mortgage promises.

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