Agreement in Principle or Decision in Principle: What`s the Difference?
When it comes to buying a home, you may have heard the terms “agreement in principle” and “decision in principle” used interchangeably. However, they actually have slightly different meanings. In this article, we`ll break down what each term means and how they`re different.
What is an Agreement in Principle?
An agreement in principle, also known as a mortgage in principle or a decision in principle, is a statement from a lender that they would be willing to lend you a certain amount of money based on the information you`ve provided about your financial situation. This is not a binding offer, but rather an indication of what you might be able to borrow.
An agreement in principle typically involves filling in an online form or speaking to a mortgage advisor, who will ask you about your income, expenses, and other financial details. Based on this information, the lender will run a credit check and assess whether you meet their lending criteria.
Once you have an agreement in principle, it can give you an idea of what properties you can afford to buy. However, it`s important to note that it`s not a guarantee that you will be approved for a mortgage when you actually apply.
What is a Decision in Principle?
A decision in principle is very similar to an agreement in principle. It`s also a statement from a lender that they would be willing to lend you a certain amount of money based on your financial situation. The key difference is that a decision in principle is typically used in the context of other types of loans, such as personal loans or car loans.
Like an agreement in principle, a decision in principle is not a binding offer. It`s simply an indication of what you might be able to borrow, based on the lender`s assessment of your financial situation.
Which Should You Get: Agreement in Principle or Decision in Principle?
If you`re looking to buy a home, you should aim to get an agreement in principle. This will give you an idea of what properties you can afford to buy, and it can also make you a more attractive buyer to sellers.
If you`re applying for other types of loans, such as personal loans or car loans, you may be asked to provide a decision in principle. This can help you to see what kind of loan you might be eligible for and what interest rate you might be offered.
In conclusion, an agreement in principle and a decision in principle are similar concepts, but they`re used in slightly different contexts. If you`re looking to buy a home, it`s best to get an agreement in principle to help you with your property search. If you`re applying for other types of loans, a decision in principle can give you an idea of what you might be able to borrow.