In the Irish mortgage market, an Approval in Principle (AIP), is a preliminary assessment indicating the amount they may be willing to lend to a potential homebuyer. This is particularly important for first-time homebuyers as it helps them understand their borrowing capacity and strengthens their position when making an offer on a property.
There could be differences in how the term Approval in Principle is used. There are there types of approval in principle, so we will explain the benefits and drawbacks of each one.
Approval in Principle Types
Continue reading to understand the general steps of mortgage approval in principle in the Irish mortgage market:
1. Broker AIP
Some brokers may issue an approval from the broker, which is not underwritten by a lender. The borrower provides basic details about the desired mortgage amount, term, and other relevant information. Based on this initial assessment, the broker provides a preliminary indication of how much you may be able to borrow.
It can be used for guidance when searching for a house.
Note: Most estate agents may not accept this when you want to place a bid on a house.
2. ‘Soft’ AIP
A ‘soft’ or less formally underwritten AIP from a lender. You can get these online from some lenders, or they can be issued by a broker via the lender platform. It is best to get a broker to issue one of these as they will scrutinize the information and make sure you have a better chance of getting approved when you do find a house. The AIP is valid for 6-12 months, depending on the lender.
Note: Many estate agents are happy to accept this type of AIP. However, some estate agents may still not accept this and look for a formal approval in principle underwritten by a lender.
*New* AIP Connect from Avant
The mortgage lender Avant Money has just launched their new AIP Connect available from your mortgage broker. This AIP gives you a document to present to estate agents when bidding on properties. Most estate agents in Ireland will accept the Avant AIP Connect! Once you find a property and go Sale Agreed, your broker will apply for a formal AIP from Avant (turn around times are as good as a few days).
3. Formal Approval in Principle/ Underwritten AIP
After the initial assessment, the borrower may proceed to a more formal application for mortgage approval in principle. Your mortgage broker will help you every step of the way to obtain a formal AIP. This gives you the best chance when going out to hunt for a house and all estate agents will accept this. To get mortgage approval, you will need certain documents and statements such as:
Bank Statements – Ideally dated within the last month, upon submission to the lender
Your Credit History – Last 3 months Credit Card Statements, a Statement of earnings (Accessed via revenue) or last 12-month Loan Account Statements. (If any)
Proof of Identify – Copy of Passport or Drivers License (If Driving License, front and back. Please ensure Passport is signed)
Proof of Your Income – Last 3 months Pay slips and Salary Cert. (Completed by employer or a statement of earnings if public sector), Employment Detail Summary (available through Revenue, MyAccount)
The lender conducts a more thorough examination of the borrower’s creditworthiness and financial situation. Once approved in principle, the borrower receives a formal letter from the lender specifying the amount they are likely to be approved for.
Note: AIP is valid for 6 months to 12 months, depending on the lender.
If you are interested in getting started with your mortgage journey and would like to use AIP Connect then get in touch with Mortgage123! At Mortgage123, our expert advisors can guide you through the process of getting your first home. Take the stress out of your mortgage by contacting us today on (061) 599 990.