Mortgage Agreement in Principle Validity: Understanding the Basics
For those looking to purchase a home, obtaining a mortgage agreement in principle (AIP) is an essential step to knowing what kind of property you can afford. But what exactly is a mortgage agreement in principle? And more importantly, how long is it valid for? In this article, we`ll take a closer look at these questions and more.
What is a Mortgage Agreement in Principle?
A mortgage agreement in principle, also known as a mortgage in principle or decision in principle, is a statement from a lender stating that they are willing to lend you a specific amount of money to purchase a property. This statement is based on basic information you provide, such as your income, employment status, and credit history.
An agreement in principle is not a formal offer of a mortgage and is not legally binding. However, it is a useful tool for understanding what kind of properties you can afford to buy before you start house-hunting.
How Long is an Agreement in Principle Valid For?
The validity of a mortgage agreement in principle can vary depending on the lender. Some lenders will honor an agreement in principle for up to 90 days, while others may only honor it for 30 days. It`s important to check with your lender to understand their policy.
It`s worth noting that an agreement in principle is only valid for the specific lender that issued it. If you decide to apply for a mortgage with a different lender, you`ll need to go through their decision process and obtain a new agreement in principle.
Why Does the Validity of an Agreement in Principle Matter?
The validity of a mortgage agreement in principle is important because it can affect your ability to purchase a property. If your agreement in principle expires before you find a property you want to buy, you may have to go through the process of obtaining a new one. This can be time-consuming and may cause delays in the home-buying process.
Additionally, if the validity of your agreement in principle expires before you make an offer on a property, you may not be considered a serious buyer by the seller. This could put you at a disadvantage in a competitive housing market.
In Conclusion
Obtaining a mortgage agreement in principle is an important first step in the home-buying process. Although it is not legally binding, it can give you an idea of what kind of properties you can afford to buy. However, it`s important to understand the validity of your agreement in principle so you can plan accordingly. Talk to your lender to understand their policy and ensure your agreement in principle remains valid throughout the home-buying process.