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. 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. 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. An AIP does not guarantee your loan, as it is not a mortgage offer.
And if the lender finds something you haven`t mentioned before that has a negative impact on your ability to get a mortgage, they might change their mind about whether they lend to you, how much they would borrow and what the interest rate will be. 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. A mortgage is in principle also known as a policy decision (DIP), agreement-in-principle (AIP) or mortgage promises. This is a statement from a lender that says it will lend you a certain amount before you have completed the purchase of your home. If you are buying a property in Scotland, you must receive one before making an offer. You will then receive a mortgage based on what the lender thinks you can afford to pay. It could be more or less than you expected.