If you look at your credit history, lenders see in most cases six years of payment history, including whether the payments were made in full, on time or even. What mortgage lenders do not want is a recently opened form of credit, whether it is a new credit card, a loan or a financing contract. 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 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. 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. Changes in their personal circumstances between the adoption of a policy decision and the final application may have an impact on the outcome. In general, this can be influenced by a change of job (even at a higher position), as it is more difficult for lenders to assess whether this is a consistent source of income for you. 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.
Don`t be tempted to hide a change in circumstances – it could not only cause problems in the future regarding the possibility of making refunds, but it is also not a good idea to try to manipulate an application with what would be material untruths. 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. You may be rejected if you apply for a mortgage in principle, which can affect your creditworthiness. 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. It is important to remember that a mortgage that was AIP is not a guarantee of the lender. It`s just a statement to say how much they might be willing to give you. It always depends on whether they find anything important that can change things between then and your application. A mortgage in principle is not mandatory, but there are several good reasons to make one. You may be wondering why, in principle, you could first commit to a mortgage instead of just asking for a real mortgage. The simple answer is that it`s faster and less effort to get a mortgage in principle.
You can often get a sort in less than an hour if there is no problem, and at most it should only take a few days. This frees you up to go home hunting in seriously, so you are able to make a fixed offer for a home that you make like the look of.