Approval in-Principle/In-Principle Approval



What is Approval-in-Principle/In-Principle Approval?

Both Approval in-Principle (AIP) or In-Principle Approval (IPA) is the same thing. Basically AIP/IPA is a pre-approved mortgage/home loans by the banks based on both your financial health and credit history.

In a successful AIP/IPA application, the pre-approved loan amount is NOT disbursed to your account, but rather just to give you an idea on what is the maximum loan amount you can get and your monthly instalment.

There is NO legal binding with the banks at this stage, so you can actually get an AIP/IPA across the Banks in Singapore for a comparison on their offers. You can go for an AIP/IPA for both HDB Flats or private residential properties.


How long it takes to get an AIP/IPA?

It varies from Bank to Bank. Some banks within a day or two, while some might take up to days or weeks. It really depends on your financial health, credit history, the accuracy of your information provided and whether you furnished the banks with all required documents.

If all is good, it should not take too long for the Banks to get back to you. However, on the safe side, you might want to check with the bankers on the processing time.


What is the validity of the AIP/IPA?

Likewise, it varies across all Banks in Singapore. However, it is valid usually for 14 days to 2 or 3 months. It will be good to confirm with the bankers on the validity of the AIP/IPA, so that you will know when you will have to commit to a property before its expiry.

Although, you can do a re-application when it expires, but you would not want to go through the hassle of submitting all your documents again. 


Why should I get an AIP/IPA?

Because it will be extremely beneficial to you in the process of shopping for your new home. SMARTz shall tell you why is that so.

1. More agents will want you as a client

You will be surprise to know that there are agents out there that they just want to make an honest living. No tricks or ulterior motives under their sleeves. These agents sees the importance of clients having AIP/IPA before their house shopping. Time is exceptionally precious to them since every second is a business opportunity to clinch a deal.

Without AIP/IPA, you will not have an idea of the price range for the houses you can commit, whether you can get a bank loan if you find a ‘Dream Home’, or whether you can service the loan as the monthly instalment might be too much for you to handle.

This results in much time wastage and the agents will be fuming, since the time spent shopping with you might have gotten them few hundreds to thousands of dollars richer. 


2. Speeds up your house shopping process

When you have an AIP/IPA on hand, you now know what is the loan amount the banks can offer you. Naturally, you will zoom into houses that matches the loan amount. Once you short-listed the ‘Dream Homes’, all you need to do is to further streamline into the ones that caught your eyes.

After-which, you are all ready to get your agent to negotiate the prices for you so that you can commit the booking fee upon successful negotiations. It is so short and sweet comparing to without having AIP/IPA.

Without AIP/IPA, when a house caught your eyes, you will hesitate whether to pay a booking fee, to commit yourself to the owner, which in return you receive an Option to Purchase (OTP) or to run for the banks to get a loan approval. Having to go through this is just too stressful. Don’t you agree?


3.SAFE from forfeiture of booking fee

Imagine yourself paying the booking fee so that your ‘Dream Home’ will not be sold to anyone else but to you. Then you realized that it was beyond your financial capabilities, or the banks are not able to grant you a loan amount that matches your ‘Dream Home’.

Now, you will be overwhelmed with emotions due to the lost of your booking fee, your ‘Dream Home’ and to start house shopping all over again. The booking fee and forfeiture amount defers based on whether you are purchasing a HDB flat or private residential property, and if it is new or resale.

House shopping can be quite tiring. So why go through such unnecessary troubles?

So if you have your AIP/IPA, you will be SAFE from losing any $$.


On the side note, between the period where you have gotten your AIP/IPA to the period before you have received your Letter of Offer,  avoid chalking up new loans and any career change. As mentioned earlier that AIP/IPA is NOT legal binding, the bank reserves the right to amend the loan amount or even reject offering you a loan if there is a change to your financial health.


Contact us! We will get the friendly bankers across all the various banks to provide you with all the necessary information (interest rates, Loan tenure, loan to value [LTV] etc.) so that you can Compare the AIP/IPA offered by different banks,  Calculate the savings and make a SMARTz choice.