As you begin the process of buying a home, one of the first steps is obtaining an agreement in principle (AIP), also known as a decision in principle or a mortgage in principle. This is essentially a statement from a lender indicating how much they are willing to lend you based on a preliminary assessment of your financial situation. In order to get an AIP, there are several documents you`ll need to have on hand.
Proof of income
One of the main factors that lenders will consider when determining your mortgage eligibility is your income, so you`ll need to provide evidence of your earnings. This can include payslips from your current job, tax returns if you`re self-employed, or proof of any benefits or rental income you receive. Lenders may want to see several months` worth of income statements to get a better idea of your financial situation.
Proof of identity
Lenders will typically require some form of identification to verify your identity and ensure that you are who you say you are. This can include a passport, driver`s license, or national identity card. You`ll also need to provide proof of your current address, such as a utility bill or bank statement.
Proof of credit history
Your credit history is another important factor that lenders will consider when deciding whether to grant you an AIP. You can obtain a copy of your credit report from one of the major credit reporting agencies (Experian, Equifax, or TransUnion) to see what your credit score is and check for any errors or inaccuracies. Lenders may also want to see evidence of how you have managed any existing debt, such as credit card or loan statements.
Proof of deposit
When you apply for an AIP, you`ll need to provide a rough outline of the property you`re interested in buying and how much you`re planning to put down as a deposit. Depending on the lender and the type of mortgage you`re applying for, you may be required to put down anywhere from 5-20% of the property`s value. You`ll need to provide evidence of where this money is coming from, such as savings account statements or investment account statements.
In addition to the documents listed above, you may also need to provide other information depending on your individual circumstances. For example, if you`re self-employed, you may need to provide business accounts or tax returns. If you`re divorced or separated, you may need to provide documentation relating to any settlement agreements or child support payments.
In conclusion, obtaining an agreement in principle is an important step in the home buying process, and you`ll need to have several key documents on hand to apply. By gathering these documents in advance and ensuring that they are up-to-date and accurate, you`ll improve your chances of getting approved for a mortgage and being able to purchase the home of your dreams.