Mortgage Approval in Principle: What You Need to Know
What is Mortgage Approval in Principle?
A Mortgage Approval in Principle is a letter of indication from a lender of how much they will be prepared to lend to you. This is based on some checks of the information you provide to them. Getting AIP means you will know whether you will get mortgage approval and will give you an idea of the amount you can borrow. It’s does not mean the lender has approved a mortgage, but it is usually the basis of the official loan offer.
Why should I apply for a Mortgage Approval in Principle?
If you make an offer on a property, you’ll have a better chance of success if you have a Mortgage Approval in Principle. This is because it shows sellers that you’re a serious buyer who is likely to be approved for a mortgage. Some estate agents may request to see it.
It will also help you to plan and budget when you are searching for properties or building your home.
It’s free to get an AIP, so it’s highly recommended to have one so that you are ready when an opportunity arises.
How long does Approval in Principle last?
When you apply for AIP, you’ll normally get a decision within 25 business days. The letter you receive is usually valid for six months. You would need to apply for a mortgage within this timeframe, but it can be extended quite easily if your circumstances haven’t changed during that time.
How can I improve my chances of getting approved?
Getting yourself ready for mortgage approval can take a number of years. The single most important issue is affordability – a mortgage is a serious commitment, in which you will be agreeing to repay a loan over an extended period of up to 35 years.
Some steps you can consider to improve your chances of getting approved for the amount you desire include:
- Saving up for a higher deposit
- Reducing your outgoings where possible
- Clearing any debts and reducing outstanding loans
- Making any loan and/or credit card repayments on time
How do I apply for Approval in Principle?
Firstly, you will need to search for the best mortgage rates and deals. There are many mortgage tools online to assist you with this, the Competition and Consumer Protection Commission has a good one.
Once you’ve found a mortgage deal, you can either apply for an AIP directly to a lender such as a bank or credit union, or via a mortgage broker, who will deal with the lender on your behalf. If you decide to go with a broker, be sure to ask them about their charges and how many lenders they represent.
You will need to provide documentation to verify your identity and information about your income and spending, dependents and any property you already own. A mortgage lender will run some mortgage eligibility checks, including a credit check.
You should apply to more than one lender to compare their offers. Don’t panic and accept the first offer you get. Similarly, if a lender rejects you, ask them what their reason was, so you can improve your chances with another lender going forward.
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