A mortgage in principle, which is otherwise known as Decision in Principle, mortgage promise, or even as Agreement in Principle. This is nothing but a statement which is given by the lender, stating that the lender will lend a certain amount to the buyer before the buyer finalises the purchase.
When you go for a mortgage in principle, you are showing the seller, that, you are more likely to afford the property that you wish to buy. This process will help you if in case you have more than one buyer, and you want to be one step ahead of the second prospective buyer.
However, in case you are worried about the poor credit rating, then the mortgage in principle will give you a fair idea to the lender whether or not you will be able to pay back the home loan.
What is essential to take under consideration is that mortgage, in principle, is offered in principle. Which means, when you make a formal application, the lender gets the complete authority to make changes in the details of the deal according to his will. Which, in return, also mean that the lander, might decide not to grant you the loan as well.
Well, this happens when your financial circumstances change. Readers may also note that if you leave a long gap between applying for the mortgage, and then getting it done, then the interest rate may fluctuate as well or you may find a better deal somewhere else.
When you opt for a mortgage in principle, please note that the lender may run through either a soft check or a hard check on your credit rating. A soft check is done by sending in a standard enquiry about your credit rating, and it doesn’t affect your credit score.
However, when someone does too many hard checks, then the lender may get a feeling that you will face difficulty in repaying your loans. It is always advisable to speak to your lender if they are going to do hard check or soft check.
Posted on September 12, 2019