A difficult search appears in your file as a credit request. While the difficult search itself should not affect your creditworthiness if many difficult searches are done on your file in a short period of time, lenders who review your credit history later for your full mortgage application, you may think that you have been turned down several times for loans and decide not to grant yourself credit. 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 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. Please click below on an ongoing article I wrote regarding the documents required for the mortgage application. Although it is very comprehensive and specifically focused on mortgage applications. This will give you a good idea of what is really needed for the whole process, and it certainly won`t hurt you to enthetheb this documentation. Also, many real estate agents (or sellers) won`t even consider taking a home off the market if you don`t have an AIP, because that means they have no idea if you`re ever considered by a mortgage lender for the amount of money you want to borrow. 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. It is not a guarantee that the lender will accept a mortgage application from you anyway. Instead, it gives you an idea of your accessibility and it is just an important step to finally get a mortgage.
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. Most mortgage lenders use a Soft/Enquiry Search when running an AIP. The advantage is that you don`t have to worry about the impact that the accumulation of a lot of difficult research on your credit report in a short time can have on your creditworthiness and ability to borrow. One drawback is that the lender may not see your full credit history, which is one of the main factors taken into account when applying for a mortgage or in some form of credit. Make sure you get advice on products and lenders before pursuing an agreement in principle, as you can leave a soft or hard footprint in your credit file. A mortgage in principle can also save time in the purchase process, both in terms of accepting your offer and speeding up the mortgage application process.