Mortgage Approval in Principle

Worriedmind

Hi,

Just curious - when approval in principle is issued, is it simply prepared by the bank manager/worker based on their experience or is this actually reviewed in any way by the underwriters/men who make the final decision?

Perhaps someone in the business can comment?

dotsman

Mortgage in principle is simply a decision by a computer - no human "decision-making" required.

That is because a MIP (Mortgage in Principle) is exactly what it says it is - In Principle.

Receiving an MIP is basically the bank saying that; yes - if you earn what you say you earn, spend what you say you spend, are in standard (permanent or permanent-like) employment, have a sound credit history and wish to borrow x amount for y years to purchase a property worth z amount, then we will happily lend you the money (should all the above check out).

There's no point in processing/reviewing all the various documents, drawing up the legal documents and doing the credit checks until an actual mortgage application is made as it is a very time-consuming (and thus, expensive) process and is really only valid at the time of doing it (an actual mortgage offer is typically only valid for 6 months -if the money isn't drawn down in that time - you have to go through some or all of the process again).

Trish56

It depends on the lender - Permanent tsb - Approval in principle in 15 minutes means you call to the Branch - the customer advisor will input your income, outgoings, personal details etc. into a calculator and then advise you the max. mortgage you qualify for. This is based only on a discussion and no documents are requested.

As dotsman says in order to get a loan offer you then have to complete an application, submit all the documentation such as 6 months current and loan and savings account statements, evidence of income I.D, Household expenses form etc . These are submitted to the lending Dept. and a credit check is carried out. If it all stacks up then you are asked to submit a valuation on the property if same is acceptable a Loan Offer is issued.

Checked with permanent tsb this morning they require you to be in continuous permanent employment fore 1 year to be considered for a mortgage.

caddy16

dotsman wrote: »

Mortgage in principle is simply a decision by a computer - no human "decision-making" required.

That is because a MIP (Mortgage in Principle) is exactly what it says it is - In Principle.

Receiving an MIP is basically the bank saying that; yes - if you earn what you say you earn, spend what you say you spend, are in standard (permanent or permanent-like) employment, have a sound credit history and wish to borrow x amount for y years to purchase a property worth z amount, then we will happily lend you the money (should all the above check out).

There's no point in processing/reviewing all the various documents, drawing up the legal documents and doing the credit checks until an actual mortgage application is made as it is a very time-consuming (and thus, expensive) process and is really only valid at the time of doing it (an actual mortgage offer is typically only valid for 6 months -if the money isn't drawn down in that time - you have to go through some or all of the process again).

This is not correct. In fact most banks will fully underwrite approval in principle applications subject to finding a suitable property.

dotsman

caddy16 wrote: »

This is not correct.

Really???

caddy16

dotsman wrote: »

Really???

A link to a mortgage calculator for one bank proves your point how exactly???

As the OP mentioned interaction with staff I'm pretty sure they will/have engaged directly with a bank.
Approval in principal where the customer has provided income verifaction etc will in most banks have been through the underwriting process.

Pablo Sanchez

caddy16 wrote: »

A link to a mortgage calculator for one bank proves your point how exactly???

As the OP mentioned interaction with staff I'm pretty sure they will/have engaged directly with a bank.
Approval in principal where the customer has provided income verifaction etc will in most banks have been through the underwriting process.

Incorrect, approval in principle is nothing solid, until a underwriter has taken a look and made a offer of credit it means very little. it simply means that the reported numbers meet with their current underwriting criteria. Approval in principle should not be confused with an offer of credit.

caddy16

Pablo Sanchez wrote: »

Incorrect, approval in principle is nothing solid, until a underwriter has taken a look and made a offer of credit it means very little. it simply means that the reported numbers meet with their current underwriting criteria. Approval in principle should not be confused with an offer of credit.

What did I say?

Pablo Sanchez

caddy16 wrote: »

This is not correct. In fact most banks will fully underwrite approval in principle applications subject to finding a suitable property.

The above?

caddy16

OP just to be clear.

If you go online or have a 5 minute chat with a bank staff member and a document is issued advising of approval subject to providing payslip, P60's etc then this obviously will not have been through the underwriting process.

If on the other hand you approach a bank with all such documents and want approval for a certain amount but haven't yet identified a property they will complete a credit report and submit to underwriting. You would then receive an approval in principle subject to finding a suitable property.

This would be the case for the majority of banks. (I cant say for certain all would operate in this way).

dotsman

caddy16 wrote: »

A link to a mortgage calculator for one bank proves your point how exactly???

Um, because it is how you get your mortgage in principle from AIB (one of the big mortgage providers in Ireland). Not sure of any others that offer it on-line at the moment (but assume most will try and follow shortly), but an on-line offering is simply exposing their internal system (which any modern bank would use).

caddy16 wrote: »

OP just to be clear.

If you go online or have a 5 minute chat with a bank staff member and a document is issued advising of approval subject to providing payslip, P60's etc then this obviously will not have been through the underwriting process.

If on the other hand you approach a bank with all such documents and want approval for a certain amount but haven't yet identified a property they will complete a credit report and submit to underwriting. You would then receive an approval in principle subject to finding a suitable property.

This would be the case for the majority of banks. (I cant say for certain all would operate in this way).

Can you name what banks do?

I can't imagine why a bank would waste it's (and a customer's) time doing this??? And if you can, please point me in their direction, as I can make a fortune selling them such a simple piece of software (and would view this as a symptom of having many more hugely bureaucratic, costly procedures that I can make an even greater fortune helping them modernise)

Worriedmind

Cool, thanks for the clarification guys...

roro2

caddy16 wrote: »

If on the other hand you approach a bank with all such documents and want approval for a certain amount but haven't yet identified a property they will complete a credit report and submit to underwriting. You would then receive an approval in principle subject to finding a suitable property.

This would be the case for the majority of banks. (I cant say for certain all would operate in this way).

AIB generally operate this way. You submit proof of income, etc, and you receive a firm sanction in principle (via letter) that is valid for 6 months. When a property is identified, a valuation report is then required. While they reserve the right not to proceed to offer letter stage, if your circumstances and account operation has not changed and you're within the 6 months, you don't generally need to provide any further info to get an offer letter.

That mortgage calculator link below is not what has generally been regarded as approval in principle, even though that is what it's calling itself. It is more akin to the way the 5-minute PTSB chat seems to work. Both banks seem to refer to these as approvals in principle, but you really haven't been approved for anything as you haven't even provided your name!

Rather than getting stuck on a term, a bit of common sense is required. The reliability of your "approval" will be a function of the time and effort the bank has spent reviewing your details.