A mortgage in principle is not mandatory, but there are several good reasons to make one. 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. 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. In principle, a mortgage requires a credit check. This is done either by an app or a difficult search on your credit file, depending on the lender. The important thing is that not all mortgages are equal in principle. So be warned and they can give you a misguided sense of security. Make sure you understand the extent of the validation using the lender`s instruction policy and that it includes a credit search. You may be rejected if you apply for a mortgage in principle, which can affect your creditworthiness. 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.
A wholesale mortgage is exactly what it looks like — an indication of what a lender can actually borrow. It remains conditional on you being able to meet the mortgage criteria in practice, and is not a promise or guarantee. 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. 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. Even if your mortgage is accepted in principle, your full mortgage application could be rejected at a later date. For example, if the lender only performed a gentle credit check, it may not have seen it all in your credit file.