Written and professionally reviewed by the Ailon Financing Solutions team
what is it actually
Approval in principle is a document in which the bank tells you: based on what we have seen, we are ready to give you a mortgage up to amount X, under such and such conditions.
This is neither a verbal promise nor an estimate. It is an official document, and it is binding on the bank, provided that the data you provided is correct and that nothing material will change until execution.
Why is it more important than it seems?
Most people think that approval in principle is a formality that needs to be sorted out before signing. It's a mistake that costs money.
He defines a real budget for you. Without approval in principle, you are looking for an apartment according to what you think you will get. With approval, you know exactly. The difference is between spending two months on apartments that are out of reach and looking in the right place.
He turns you into serious buyers. A seller who receives two identical offers, one from a buyer with approval and one without, will almost always choose the first. In a competitive market this is a real advantage.
It gives you bargaining power. A buyer who knows for sure that financing is closed can conduct a completely different negotiation.
At the price for the resident, this is a must. It is impossible to sign a contract without approval in principle, and it is highly recommended to have it already at the stage of choosing the apartment in the project.
what should be brought
The list varies slightly between banks, but the core is constant:
For employees:
- Three recent pay stubs
- Receipt printouts for three to six months
- Confirmation of employment or employment contract
- ID card with appendix
For the self-employed:
- Tax assessments for the last two years
- Updated profit and loss statement
- Accountant's confirmation of the income
- Business and personal account printouts
For everyone:
- Details of existing liabilities: loans, other mortgages, leasing
- Proof of the source of equity
- Property details, if already selected
how long does it take
When the case is settled: Between two days and a week.
The important word here is "tidy". A case that arrives partially returns with demands for completion, and each such round adds days. A file that is submitted complete and organized is examined in one sequence.
This is not a password. One of the significant differences between independent submission and accompanied submission is precisely here: those who know the requirements in advance submit once.
The mistakes that hurt the most
issue an authorization from only one bank. The first approval is a starting point, not an end. Parallel appeal to several banks is what produces the competition that lowers the interest rate. Those who settle for the bank where they manage an account pay for the convenience.
Change something after you have received approval. Changing jobs, taking out a car loan, opening a new credit line. All of these can invalidate the approval. Until the execution, maintain stability.
Treat the amount as a goal. Did the bank approve a million and a half for you? That doesn't mean you should take a million and a half. The approval is a ceiling, not a recommendation. The monthly repayment should match the life you want to live, not the maximum that the system is willing to approve.
to go into the red in the months before. The bank examines the conduct of the account. Three months of an orderly account before the application is worth more than any explanation.
what happens after
The approval in principle is not the end of the process but the beginning. It is followed by:
- Choosing the apartment and signing the contract
- Appraisals of the property
- Final negotiations on the mix and interest rates
- Signing the mortgage documents at the bank
- The collateral and registration phase, until the case is closed
The stage where the bulk of the savings comes in is actually the third. The approval in principle determines how much you will receive. The mix determines how much you will return.
The bottom line
Approval in principle is the tool that turns you from "interested" into "buyers". It's fast, it doesn't cost money, and it changes the entire balance of power vis-à-vis the seller and vis-a-vis the bank.
Anyone looking for an apartment without a basic approval in hand is working blindly.
Prepare before submitting the application
start withMortgage readiness check and help inThe list of documents for the mortgage. The bank examines each request according to the data, documents and its credit policy.
