Agreement on Principle Mortgage: A Guide for Home Buyers
When searching for a mortgage, one of the first steps is obtaining an Agreement on Principle (AOP) from a lender. An AOP is also commonly referred to as a mortgage in principle or decision in principle. This document provides an indication of how much you might be able to borrow based on your income and credit score.
What is an Agreement on Principle Mortgage?
An Agreement on Principle Mortgage is a written statement from a lender or mortgage broker that confirms how much they would be willing to lend you if you were to purchase a property. The AOP is not a formal mortgage offer, but it does show that the lender is willing to work with you and that you have a good chance of being approved for a mortgage.
How does an Agreement on Principle Mortgage work?
When applying for an AOP, you will need to provide the lender with information about your income, expenses, and credit history. The lender will use this information to assess your eligibility for a mortgage and determine how much they would be willing to lend you.
Once the lender has assessed your application, they will provide you with an AOP in writing. This document will outline the amount of money you can borrow, the type of mortgage that would be best for you, and the interest rate you can expect to pay.
Why is an Agreement on Principle Mortgage important?
An AOP is an important document for home buyers for several reasons. Firstly, it helps you understand how much you can afford to borrow and therefore how much you can afford to spend on a property. This makes it easier to narrow down your search to homes that are within your price range.
Secondly, having an AOP can give you an advantage over other buyers when it comes to making an offer on a property. Having an AOP shows sellers that you are serious about buying and that you have already taken steps to secure financing.
Thirdly, obtaining an AOP can save you time when making a formal mortgage application. Since the lender has already assessed your application and credit history, they will have a head start on processing your formal mortgage application.
How to obtain an Agreement on Principle Mortgage?
You can obtain an AOP by contacting a lender or mortgage broker and providing them with the required information. Some lenders will allow you to apply for an AOP online, while others will require you to speak with a representative over the phone or in person.
When applying for an AOP, be sure to provide accurate information about your income, expenses, and credit history. This will help the lender provide you with an accurate estimate of how much you can borrow.
In conclusion, obtaining an Agreement on Principle Mortgage is an important step for home buyers who are looking to purchase a property. This document provides an indication of how much you can borrow and can give you an advantage when making an offer on a property. Contact a lender or mortgage broker today to obtain an AOP and start your journey towards homeownership.