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). You must provide basic personal data, including your salary, how much you want to borrow and what your monthly fees add up. 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. 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. 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. An AIP does not guarantee your loan, as it is not a mortgage offer. And if the lender finds something you haven`t mentioned before that has a negative impact on your ability to get a mortgage, they might change their mind about whether they lend to you, how much they would borrow and what the interest rate will be. 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. To reach an agreement in principle, you must contact a mortgage lender directly or through a mortgage broker. 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. An AIP mortgage typically takes up to 90 days and can help speed up the application process for a formal mortgage, as a lender can use the AIP to complete your application. Keep in mind that you don`t need to use the same lender that gave you the AIP when applying for a formal mortgage.
If you are considering how much money to borrow, the mortgage lender should check your credit history to make sure you would be able to meet the monthly payments. 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.