If you have a mortgage in principle, you can show sellers that it is likely that you can afford the property you want to buy. This could help if you choose between more than one buyer. If you are worried about bad credit, a mortgage could in principle give you an idea if a lender thinks you can afford to pay off your home loan. A mortgage is not in principle a formal mortgage offer, nor is it a guarantee that the lender will give you a mortgage in the future. A decision in principle is not a guarantee. If you go through the full application process, the lender will take a closer look at your income and credit history. You can choose not to give yourself credits at this point. 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. Lenders will probably conduct credit checks if you are applying for a mortgage in principle. However, some lenders may do “soft research” and others “difficult research.” A flexible search records credit quality verification as a query, while a difficult search indicates that you have applied for credit. If you have too much difficult research in your credit report, this may suggest to lenders that you may have difficulty repaying your loans. You can check with a lender if they are running a gentle or difficult search before applying in principle for a mortgage.
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. In principle, you will receive a mortgage online, over the phone or, if you apply from a bank or real estate credit company, in a branch. 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. 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. The important thing is that not all mortgages are equal in principle. So be warned and they can give you a misguided sense of security. Make sure you understand the extent of the validation using the lender`s instruction policy and that it includes a credit search. 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).
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. 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. 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. 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. 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.