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. Most lenders search for ”hard” credit before offering you an agreement in principle that leaves traces in your credit file. The better your credit score, the more likely you are to be accepted for an AIP. An excellent credit rating can mean that you are eligible for better mortgage transactions. 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 impact of an AIP on your credit score depends on the type of credit check the mortgage borrower needs. Once you have decided to start the house hunting seriously, you are in principle asking for a mortgage. Apart from its practical applications, it will help you focus on and engage in your task.
Knowing what you can afford, even in theory, gives a huge boost to trust. Some lenders will give you a certificate if they offer in principle a mortgage that can be useful to show real estate agents. What this entails differs depending on the lender, but could be a) an explanation that they are willing to lend the amount requested for b) the maximum amount they may be willing to lend, or c) simply a statement that your mortgage was accepted in principle. Even if it is not a full mortgage application, you must still provide information to obtain an agreement in principle. A mortgage can normally last between 60 and 90 days, depending on the lender. If you have not found a property or accepted an offer during this period, you may need to receive another one. Renewal should be easy, unless your circumstances (or economy) have changed significantly. 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.