Agreement in Principle Credit Check: What It Means and How to Get One
If you`re in the process of buying a home, you`ve probably heard the term “agreement in principle” (AIP) thrown around. But what is it, exactly? And how does it relate to your credit score?
An AIP is a written statement from a lender that outlines the amount they`re willing to lend you based on your credit score, income, and other financial information. It`s a useful tool for homebuyers because it gives them an idea of how much they can afford to borrow before they start looking at properties.
But before you can get an AIP, you`ll need to undergo a credit check. Here`s what you need to know about credit checks and AIPs.
What Is a Credit Check?
A credit check is an assessment of your credit history. It`s designed to help lenders determine how risky it is to lend you money. Your credit history includes information about your past loans, credit cards, and other financial accounts. It also includes information about your payment history, how much debt you have, and how often you`ve applied for credit in the past.
There are two types of credit checks: soft checks and hard checks. A soft check doesn`t affect your credit score and is usually done for informational purposes only. For example, when you check your own credit score, that`s a soft check. A hard check, on the other hand, is done when a lender wants to assess your creditworthiness before granting you a loan. Hard checks can temporarily lower your credit score.
What Is an Agreement in Principle?
An AIP, also known as a mortgage in principle, is a written statement from a lender that states how much they`re willing to lend you based on your financial information. It`s not a guarantee that you`ll get a loan, but it gives you an idea of how much you can afford to borrow. You can use an AIP to help you search for a property within your budget.
How Are AIPs and Credit Checks Related?
To get an AIP, you`ll need to undergo a credit check. Lenders use your credit score and financial information to determine how much they`re willing to lend you. If you have a good credit score and a steady income, you`re more likely to get a higher AIP.
It`s important to note that getting an AIP doesn`t guarantee that you`ll be approved for a mortgage. Lenders will still need to verify your financial information and assess the property you`re interested in before granting you a loan. But an AIP can give you a head start in the homebuying process by helping you narrow down your search to properties within your budget.
How to Get an AIP
To get an AIP, you`ll need to apply for one with a lender. You can do this online or in person. You`ll need to provide information about your income, employment history, and financial accounts. You`ll also need to undergo a credit check.
Once the lender has assessed your financial information and credit score, they`ll give you an AIP. This usually takes a few days.
In conclusion, an agreement in principle credit check is a vital step in the homebuying process. It allows you to determine how much you can afford to borrow and gives you a head start in your property search. To get an AIP, you`ll need to undergo a credit check and provide financial information to a lender. If you have a good credit score and a steady income, you`re more likely to get a higher AIP.
