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 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. 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). In principle, agreements are primarily used to determine whether you can buy the amount you want to borrow on the basis of a credit multiplier applied to your income. Their expenses are also taken into account, as are the lender`s individual criteria (what type of “risk profile” they met, the length of the mortgage, etc.). Control generally assesses: As an IAP is not a guarantee that you receive a mortgage offer, it is good to know what factors can influence the lender`s decision when it comes to the full application. You will then receive a mortgage based on what the lender thinks you can afford to pay. It could be more or less than you expected.
You must provide basic personal data, including your salary, how much you want to borrow and what your monthly fees add up. An agreement in principle, also known as a “decision in principle,” “mortgage promise” or “mortgage in principle,” is a certificate or statement from a lender indicating that it would lend you a certain amount “in principle.” Keep in mind that if any of the details you enter, if they change in principle for the mortgage during the validity period (for example, they change jobs), you may need to check with your mortgage broker or lender to make sure that your mortgage is in principle still valid, and renew the application if necessary. Most lenders search for “hard” credit before offering you an agreement in principle that leaves traces in your credit file. In principle, a mortgage requires a credit check. This is done either by an app or a difficult search on your credit file, depending on the lender. The lender will carefully review your financial history, including bank statements, salaries and any additional income, employment history and address, how much deposit you have, and all other savings. This is called accessibility control. As part of an IAP, the lender or advisor must carry out a credit check (with your consent). When the lender makes what is called a “hard check,” it leaves a “fingerprint” on your credit report. Use our mortgage calculator to find out how much you could borrow, how much it could cost a month and what your credit-to-value ratio would be. 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 can normally last between 60 and 90 days, depending on the lender.