AIP (Approved in Principle)

AIP (Approved in Principle)

AIP (Approved in Principle) is an approved loan application made before a property is purchased.  Can be just a broad an indication of likely loan approval based purely on loan application information or can be a fully assessed loan application with supporting documents verified and approval granted subject only to the property being acceptable. There is never a 100% guarantee you’ll be fully approved until a lender knows exactly what property you’re buying – and at what price.

A lending specialist will also look at your requirements and objectives, along with your current financial situation and will ask:

  • Who you are? You will need to provide ID.
  • How much you earn? This includes your salary, investments or rental income.
  • How much you own? They will evaluate all of your assets, including cars, jewellery, shares and savings.
  • Do you owe money? From a car lease to credit cards, you’ll need to declare any debt or loans you currently have.
  • What are your living costs? They will look at your monthly expenses groceries, bills, transport and lifestyle to help estimate your loan.
  • What type of properties you’re looking at? They will need to know the suburbs you’re looking at, property type and size to ensure it’s a good investment for them too.

Approval in Principle (AIP) means the bank has agreed to extend you the funds for a home loan, subject to a valuation of the property. In summary, both terms mean roughly the same thing, which is that your lender has agreed in principle to lend you a certain amount of money toward the purchase of a property. Unlike Pre-approval, In-principle approval requires a full credit assessment and responsible lending assessment. Your lender will look at your current financial situation and ask for formal identification, your income, assets, debts, your costs of living etc.

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While you're looking for a property, the approval in principle (AIP) lasts six months and gives you an estimate of how much money you can borrow at that time. Before you put in an offer on a house, call your bank and request a letter of offer.

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