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. 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). 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. 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 is important to remember that, in principle, an agreement is not a mortgage offer or official confirmation that you have a mortgage. To do this, you must go through the full application process.
An agreement in principle (AIP) – also called Mortgage In Principle (PMI) decision – is a written estimate or statement from a lender to say how much money it would lend you if you bought a property. 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. 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. 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. To reach an agreement in principle, you must contact a mortgage lender directly or through a mortgage broker. A mortgage is in principle also known as a policy decision (DIP), agreement-in-principle (AIP) or mortgage promises.
This is a statement from a lender that says it will lend you a certain amount before you have completed the purchase of your home. If you are buying a property in Scotland, you must receive one before making an offer. 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 size of your contract can in principle be a useful indicator of how much you can borrow.