Lenders will probably conduct credit checks if you are applying for a mortgage in principle. However, some lenders may do “soft research” and others “difficult research.” A flexible search records credit quality verification as a query, while a difficult search indicates that you have applied for credit. If you have too much difficult research in your credit report, this may suggest to lenders that you may have difficulty repaying your loans. You can check with a lender if they are running a gentle or difficult search before applying in principle for a mortgage. 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. 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. 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. 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.
An AIP is not the same as a formal mortgage offer, so you should always apply for a mortgage once you have accepted an offer for a property. Once you have reached your agreement in principle, you can meet with one of our mortgage advisors in a branch or speak by phone to a member of our mortgage team. Ask for a reminder to fix this. 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. 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. 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. The mortgage lender will then check your credit file to assess your financial status and calculate what it might be willing to lend you. 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 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. The size of your contract can in principle be a useful indicator of how much you can borrow. You can use it to search for real estate in your price range.