What is Approval in Principle?
Understanding the way home buying works is challenging when you don’t understand the jargon being used. Knowing what it all means gives you a better start to the home buying process.
Approval in Principle makes it possible for you to understand exactly what you can borrow and what you will be approved for. You might also hear it referred to as “borrowing capacity estimate.”
By obtaining Approval in Principle, you’ll know the maximum amount you’ll be allowed to borrow by a lender. It will also tell you what kind of deposit you’ll need. Depending on the lender, you may also receive multiple options for a 10% or 20% deposit.
It doesn’t cost you anything to apply for approval in principle. When you have an estimate of how much you’d like to borrow and where you want to buy, it’s time to apply. It also helps if you have the type of property you’d like to purchase in mind.
Do keep in mind that there is never a guarantee that a lender will ensure you’ll get the loan, especially if personal circumstances change along the way. As long as nothing has changed, the entire process of securing the loan and the property should be reasonably straightforward.