Get a Decision in Principle
, by Matt Stevens
There are an array of things which you can do to make securing that dream home easier like, improving your credit score, saving up for a sizable deposit, and just generally having a degree of personal and financial stability attached to your mortgage application.
However, another facet of the entire process to be aware of is a decision in principle (DiP), sometimes referred to as a mortgage in principle (MiP), an agreement in principle (AiP), or a mortgage promise.
Getting a DiP represents a fundamental step towards achieving housing happiness. So that you can inform yourself on the subject, we’ve put together this piece which offers some guidance in the area. We’ll go over:
What is a decision in principle?
A decision in principle is an indication that you are able to afford to borrow the amount which you need in order to buy a property, or instead, remortgage.
If you get a DiP, then providing it serves as proof to potential lenders that your finances are inline with the house or flat you’ve chosen for purchasing.
Is a decision in principle the same as a mortgage offer?
No, a decision in principle offers an estimate of your borrowing capacity without a firm commitment. Conversely, a mortgage offer represents an official agreement from a lender to extend you a mortgage.
When should you get a decision in principle?
Ideally, it’s best to have a decision in principle before you begin definitively searching for properties. This is because the majority of estate agents will ask whether you currently have an DiP, given that it helps them to know if you’re prepared.
Having said this, if you’re still looking around to find out what you can get within your means which matches up to your requirements, then it’s not essential to have a decision in principle so soon. Instead, you can simply get a quote regarding what sort of figure a lender would offer you at present.
How long does a decision in principle last?
Generally, a decision in principle lasts for 90 days, i.e., around 3 months. Albeit, the length of this period is ultimately decided by the lender, with some covering only a single month (30 days).
This assumes that there has been no changes in your income, spending habits, or debts you may have since the date when you received the DiP. If such a case applies to you, or your DiP expires, then you can and should reapply.
Does getting a decision in principle affect your credit score?
It depends. To assess your eligibility when you apply for a decision in principle, the lender will run a credit check. If they check your credit file using a hard credit check, then this indeed will leave a mark that can be seen by other lenders. Moreover, multiple hard credit checks in a short span of time will negatively impact your credit score.
As such, if you want to get a notion of your current suitability before you apply, you can use our free credit check tool (£14.99 per month after the free 7-day trial). Using it will help you to seek out any possible mistakes or fraudulent activity on your profile, so that you can deal with such problems as soon as possible. The trial and subscription can be cancelled at any time.
On the other hand, if the lender carries out a soft credit check, then a footprint won’t be left on your report, nor will your credit rating be affected.
Can I get a decision in principle if I have bad credit?
Yes, you can get a decision in principle if you have adverse credit, as signalled by past financial problems. Though, admittedly, your options will be slightly more limited as opposed to if you had an excellent credit rating.
Details concerning your credit history that will affect your chances of getting an DiP include if you’ve ever had a court county judgement (CCJ), an IVA, if you’ve been recently rejected, or if you’ve previously failed to meet payday loans or claimed bankruptcy. Yet, their influence will be lessened if they occurred more than 6 years ago.
What do I need to apply for a decision in principle?
In essence, you will still be subject to the same aspects of the usual mortgage application process despite only applying for an DiP.
So, you’ll need to provide a UK address history, income evidence, two-three years’ worth of accounts if you’re self-employed, credit information, details regarding your outgoings, and identification. Likewise speaking to a mortgage broker will heighten your chances of approval significantly.
Does a decision in principle mean I will get a mortgage?
A decision in principle does not guarantee that you’ll be offered a mortgage loan. The purpose of a DiP is to give you an idea of what you can expect to be offered from a lender.
Although the application process for an DiP is comparable to that of a regular mortgage application, it remains that they’re not legally binding and so the lender will need to verify the details of the DiP if you have one.
Therefore, the information contained by a decision in principle makes up part of a mortgage provider’s checks to see if you fulfil their lending criteria, rather than being a borrowing guarantee. After all, there are other factors which influence a lender’s decision such as interest rate changes alongside possible changes in your personal circumstances.
What are the benefits of getting a decision in principle?
While not mandatory, getting a decision in principle is often recommended for the inherent benefits they bring.
Namely, having an DiP means you can start to view properties with a more refined understanding of what you can actually afford, in addition to showing sellers and estate agents that you are a serious potential buyer.
How do I get a mortgage decision in principle?
There are two pathways for getting a mortgage decision in principle. Either, you can go directly to the lender you’re likely to get a mortgage from, or you can speak to a mortgage broker.
The former of the two can feel more convenient, but it will take longer and your mortgage options will be relatively limited as a result of narrowing your lender down to a single choice. That said, getting a DiP from a mortgage provider won’t categorically tie you down to that specific lender.
Whereas, if you go to a mortgage broker then they will present you with a wide range of deals you are eligible for, so that you can select the best one for your personal situation and financial circumstances. On top of this, mortgage brokers will be able to arrange a DiP almost instantly.
We at The Mortgage Genie have helped many of our UK clients to get a mortgage decision in principle. We have the experience and market knowledge to ensure that you get the mortgage product that’s right for you, as well as to guide you through the entire process from beginning to end.
If you’re in need of a team of expert mortgage brokers, then be sure to get in touch with us at 01915809890 today. And why not see how much you could borrow up to right now by using our mortgage calculator?
The above blog has information contained within which was correct at the time of publication but is subject to change.
FAQs
How much does it cost to get a decision in principle?
Typically, obtaining a decision in principle from a mortgage broker or lender is free of charge.
Can you get a decision in principle when you’re a first-time buyer?
Certainly. In fact, estate agents frequently recommend first-time buyers to secure a decision in principle because it provides reassurance to all parties involved, confirming your capability to proceed with the purchase.
What happens after I have a decision in principle?
Upon identifying your desired property, you should initiate the formal mortgage application process by reaching out to your broker or lender. This involves conducting a property valuation and undergoing rigorous credit checks before the lender extends a mortgage offer.
Can my mortgage offer differ from my decision in principle?
Yes, it can. A lender is free to change their offer amount once they’ve completed a full affordability check and carried out a valuation of the property. For instance, if the property is assessed at a lower value than expected, your final mortgage offer may be reduced compared to your decision in principle.
Can I be declined after a decision in principle?
Yes. A decision in principle isn’t a guarantee of a mortgage offer, so a lender can still turn you down later. This will happen if, during their full checks, the lender discovers information that doesn’t fit their lending criteria.
How long does a decision in principle take?
You can get a decision in principle within minutes if you apply online as it’s based on a brief overview of your financial details, but it could take a little longer if your circumstances are more complex.
