An agreement in principle (AIP) – also called Mortgage In Principle (PMI) decision – is a written estimate or statement from a lender to say how much money it would lend you if you bought a property. The objective of Phase 4 is for the parties to negotiate an agreement in principle. It is the agreement that will form the basis of the treaty. It should be the result of a thorough examination of the issues mentioned in the framework agreement. Some real estate agents or sellers will be happy to know that you have an agreement in principle before looking at a property or making an offer, as this gives them the certainty that you can afford it, and this will not affect the sale. Simply put, an agreement in principle, sometimes written in the same way as the AIP, is also called a “policy decision” or “mortgage in principle,” a written estimate of the lender that indicates how much you can borrow. During the negotiations, it is assumed that substantial agreements on certain subjects or chapters may be reached by a table. Once the table has accepted the agreement in principle as a comprehensive document, the chief negotiators may recommend that the agreement be approved by their respective sponsors. Your recommendation is usually indicated by the paragraph of the agreement by the chief negotiators. As with framework agreements, agreements in principle must be approved in accordance with the authorisation procedures of the parties concerned. The agreement will then be signed. The approval process should allow the parties to give their negotiators a mandate to conclude a contract.
The important thing is that not all mortgages are equal in principle. So be warned and they can give you a misguided sense of security. Make sure you understand the extent of the validation using the lender`s instruction policy and that it includes a credit search. The agreement in principle should contain the essential points of coherence between the parties. The parties should confirm their procedures for ratifying the final treaty and put in place a mechanism for developing an implementation plan.