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. 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. An “agreement in principle” is given by lenders to say that, based on basic information about you, they think they would grant you a mortgage if you apply for a mortgage. It may be helpful to have an agreement in principle if you are hunting at home, as this gives you an idea of what you can afford, and some housing agents will check if you have one before you show a property. But it does not guarantee you a mortgage, and it is possible to be rejected by a lender after giving you an agreement in principle. If you have had credit problems in the past or have a limited credit history and are not sure what a bank or construction credit union might lend you, an agreement in principle could give you extra security from your credit perspective. First of all, remember that the agreement is actually that – it`s not a loan promise, it`s just an indication of how much a lender might be willing not to make you substantial changes before that date and when filing your final application. You may not get a definitive answer as to why you were rejected (unless you simply can`t afford the mortgage), much like any other type of loan, but that`s one of the most common reasons: if this happens, it`s often because the lender found something that didn`t meet their criteria when they did a full search of your information. You may be able to find out what it is by asking the lender.
You may also find it useful to use a mortgage broker who will be able to evaluate your financial and credit information and find a mortgage that will probably fit. Even if you decide to apply for a mortgage from the same lender that gives you a policy decision, there are slightly different reviews for each step, which may explain why you pass one but not the other. Changes in your income could also make a difference. If you don`t have pay slips yet to check your income, it may be difficult to prove it. As an IAP, if you apply for a mortgage, your income and expenses are audited to make sure you can pay the mortgage you are asking for — in fact, they are scrutinized. The big difference between the two reviews is that the application contains a rigid application/search of your credit report that reveals everything that is held and, as noted above, probably involves checking with more than one credit reference agency. An important difference is that an IAP is not legally binding and the lender retains the right to offer you another amount or other mortgage product (and an interest rate). Some lenders may even withdraw their offer.