Before applying for a mortgage, and often before making an offer on a property, you may need a mortgage in principle called a Decision in Principle (DIP), sometimes referred to as an Agreement in Principle (AIP) or a Lending Certificate.
With a Decision in Principle you can take the first step to buying or remortgaging your home. Even though a Decision in Principle isn’t required, some estate agents may insist that you have one.
WHAT IS A DECISION IN PRINCIPLE?
A Decision in Principle is a certificate from your mortgage provider stating how much they have agreed, in principle, to lend you to buy a property. It will typically last between 60 and 90 days.
It is not a guarantee that the mortgage provider will lend you this money but rather an indication of the amount the provider would agree to if you were to pass all of their future assessments and checks.
WHY DO YOU NEED A DECISION IN PRINCIPLE?
You don’t necessarily need a Decision in Principle to buy a property, but it can help with the sales process. Estate agents will use it to see if the properties they are showing to you are within your price range, and sellers will use it to judge whether you are a serious buyer. This is particularly useful for first-time buyers, who have no previous history of being accepted for a mortgage.
HOW DO YOU GET A DECISION IN PRINCIPLE?
To get a Decision in Principle you can apply through most mortgage providers’ websites, stating:
- The amount you wish to borrow
- The value of the property you wish to buy
- Your income
- Your regular outgoings
Many mortgage providers will give you an instant response.
HOW IS THIS DIFFERENT FROM A MORTGAGE APPLICATION?
For the Decision in Principle, a mortgage provider will base their answer on the basic information you supply and a credit check. If you then decide you want to apply for a mortgage with them, you will need to give much more detailed answers to questions about your income and outgoings, and provide evidence, usually in the form of bank statements, bills, payslips, etc.
CAN A DECISION IN PRINCIPLE AFFECT YOUR CREDIT SCORE?
Most mortgage providers require a soft credit check, meaning that it shouldn’t harm your credit score if you fail. Others require a hard credit check, which may have an impact on your credit score if you fail.
If you’re concerned about failing the credit check, find out which type of check your mortgage provider requires, or speak to a broker to find a mortgage provider that only requires a soft credit check. Don’t apply for multiple Decisions in Principle, as several hard credit check failures in a short space of time can be particularly damaging to your credit score.
Before you start your property search or plans to remortgage, it may help to have a clear idea of how big a mortgage you’ll be able to obtain. Getting a Decision in Principle should give you a good indication of how much you might be able to borrow before you submit a full mortgage application and receive a formal mortgage offer. Because we know which lenders will do hard and soft credit checks, we strongly recommend using an independent whole of market Mortgage Advisor (like us) who won’t charge you a broker fee and can navigate this process with you.
A whole of market Mortgage Broker, who doesn’t charge you a Broker fee.
Irrespective of whether you are looking to buy a new home, re-mortgage an existing property, or looking to protect your family from the unpredictability that life throws at it or protect your income if you are unable to work due to accident or ill health.
Yes Mortgage Services are committed to offering you the highest possible standards of service. We can undertake the whole process from answering the initial questions through to handling multiple product applications. Ensuring that everyone gets treated with the same urgency and maintaining your best interests are our main goals irrespective of the value of the mortgage.
We recognise that both we and our customers have everything to gain if we look after your best interests and treat you fairly in all aspect of our dealings with you.