This could help if they choose between more than one buyer. If you`re 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. In principle, a mortgage involves a credit quality check. This is done either by a gentle or difficult search in your credit file, depending on the lender. A mortgage is in principle exactly what it looks like – an indication of what a lender can in principle lend you. It remains to meet the criteria of the mortgage in practice and is not a promise or a guarantee. An agreement in principle (AIP) – also called a decision in principle (DIP) or mortgage in principle (PMI) – is a written estimate or statement from a lender to say how much money they would lend you if you bought real estate. There will usually be no fees from a lender or broker for a mortgage in principle. Normally, a mortgage broker only calculates when your mortgage transactions are secure (and sometimes not even then – learn more about how mortgage brokers calculate).
Once you`ve decided to start looking for a home in earnicy, apply for a mortgage in principle. Beyond its practical applications, it will help you focus on your task and commit to it. Knowing what you can afford, even in theory, is a huge boost in confidence. For example, some lenders only allow mortgages on a certain number of houses or apartments in a particular new development….