How To Get a Mortgage Decision In Principle

Applying for a mortgage is an exciting time. But it can be really confusing, even if you've done it before! Whether you’re a first time buyer, a homeowner looking to move to a new property or are looking to remortgage, it all starts with getting a Decision in Principle from a mortgage lender.

What is a mortgage decision in principle?

A Decision in Principle (DIP) - also called an Agreement in Principle (AIP) or Mortgage in Principle (MIP) - is a certificate from a mortgage lender that confirms they’re willing to lend you money to buy a property. It confirms they’d be happy for you to borrow from them, and shows you're a serious buyer when making an offer on a property.

Your DIP takes into account whether you can afford to borrow the amount you want based on your income and regular outgoings. 

Why is it a good idea to get a Decision in Principle?

Estate agents will usually want you to have a DIP in place before they’ll accept an offer on a property. It reassures the seller too – they’ll know you’re serious enough about the property for them to take it off the market. You need a DIP in place before you can submit a full mortgage application, so getting one before you start looking at homes saves time.

If you have a bad credit history, or other potentially complex factors like self-employment, it can give you the confidence to put in an application.

How long does a Decision in Principle last?

It depends on which lender you get the DIP from, but they usually last between 30 and 90 days.

Does a Decision in Principle involve a credit check?

It depends on the lender. When assessing your DIP application, some lenders will carry out what’s called a SOFT credit check. This means there’ll be no history of the check for other creditors to see. Some will carry out a HARD credit check at DIP stage. While this could affect your credit score, lenders who carry out a hard credit check for your DIP are more likely to approve you when it comes to the full mortgage application.

Does a Decision in Principle guarantee me a mortgage?

A DIP is a strong sign that you’ll be approved, but it’s not a 100% guarantee that you’ll get a mortgage. If you apply for a mortgage with the same lender that provided your DIP, and you still meet the same criteria, you’ve got a pretty good chance. 

A DIP indicates the size of mortgage you’re eligible for, which helps you to determine how much deposit you’re going to need and the options that are available to you. It’s good to have it in place before you start house-hunting.

How do I get a Decision in Principle?

It’s best to speak to a mortgage broker before starting a DIP application. Getting advice from someone who lives and breathes the mortgage industry is a good move. It’s especially important if you have bad credit or a complex income such as from self-employment. Our Mortgage Experts can explain your options and walk you through the process. They’ll be able to give you a better idea of how much you can borrow and what price range of properties you should be looking at. 

You can apply directly to a mortgage lender, but doing this means you’ll have fewer options. This is because you’ll only be able to choose from that particular lender’s mortgages, and the mortgages that are directly available to customers are extremely limited anyway. Brokers have access to lots of different and varied options. They have established relationships with specialist lenders and have experience in dealing with complicated applications.

Our Mortgage Experts aren't loyal to a lender, they’re loyal to you. They’ll find you the right lender and the right mortgage deal for your needs. Get started now.

What documents do I need for a Decision in Principle?

To get your mortgage DIP, you’ll usually need to provide:

• Personal details for all of the mortgage applicants (Name, Date of Birth, etc)

• Previous address details if these have changed in the past three years

• Photo ID like your passport or driving licence

• Utility bills as proof of your current address

• Basic information about regular your outgoings, including debts

• Information about your earnings

It’s good to start preparing these documents ahead of a full mortgage application.

How long does it take to get a Decision in Principle?

You can normally get a DIP fairly quickly, because you don’t need to submit as much paperwork as you would with a full application. It’ll vary between lenders, but you could get a DIP within a few days. Remember that it's not a guarantee that you'll get a mortgage, but it can help give you an indication of property price and what your monthly mortgage repayments could look like. 

How is a Decision in Principle different from a mortgage offer?

It’s important to know that a DIP is not a mortgage offer - it’s just the first step in the property-buying process. It doesn’t guarantee you’ll be approved for a mortgage. 

A DIP is also not related to a specific property, it’s just an indication of what you could borrow. You’re also not committed to get a mortgage with the lender that provided your DIP - you’re free to apply to any lender. (Though you should always choose your lender carefully. Getting a mortgage rejection really hurts your credit score, so it’s best to work with a mortgage broker who can guide you through the process.)

You get a formal mortgage offer following your full mortgage application and when the lender has carried out their survey. Along with testing your ability to make repayments, they check the property you’re buying is worth what you’re paying for it. 

This isn’t to say that you shouldn’t get a DIP. Most estate agents will want to see one before accepting an offer on a property. Think of your DIP as a test run, and a way to give you some confidence and peace of mind if you’re worried about running into any bumps in the road.

What happens if my Decision in Principle is rejected?

There’s a number of reasons why you might not be approved for a DIP. Your lender or broker will be able to tell you exactly why. Having your DIP being ‘referred’ is different from being declined. If your DIP’s been ‘referred’ it means the mortgage underwriter is looking at your application in a bit more detail. If you’re referred, your mortgage advisor can step in and explain anything the underwriter isn’t sure about.

How long does a mortgage application take?

There's no standard timeframe when it comes to mortgage applications. But you can usually expect to wait around a month from when you submit your application to getting a mortgage offer. If your situation is a little more complicated it will probably take a bit longer as there's more factors for the lender to consider.

Your mortgage broker will be your shield between you and the lender. They'll be able to chase up any delays, and clarify anything for the mortgage underwriters. 

How can I speed up my mortgage application?

Mortgages can take a long time because they involve so many thorough checks and processing of information. It's best to be as prepared as possible so that you're ready to go when the time comes. Try to gather the following documents ahead of your application:

• Three months of payslips, or accounts if self-employed

• Three months of bank statements

• Your last P60

• Proof of ID such as passport or driving license

• Utility bills from the last three months to prove your address (your name will need to be on them). Also ensure you’re on the electoral roll

• Details of all outgoings and financial commitments, including credit card and loan repayments

• Proof of your deposit (a gifted deposit will need a bank statement and letter of confirmation from the person giving it to you)

• Your solicitor’s details

• The estate agent’s details

Along with assessing your documents and affordability, the lender will carry out what’s called a mortgage valuation survey. This isn’t the same as a building survey. The valuation survey assures the lender the value of the property you’re buying, and flags anything which might affect how much it’s worth. Lenders rely on a property’s value as security against your loan, so this is an important part of the process. How long this takes depends on how busy their surveyors are.

Once a lender is happy with the valuation and your ability to make repayments, they’ll offer you a mortgage.

How long does a mortgage offer last?

It varies between lenders, but a typical mortgage offer is valid for up to six months. A remortgage offer is usually around three months (as there’s no actual purchase happening, the process won’t take as long).

Some lenders will set a deadline for completion instead of a time limit. If you pass the deadline, you’ll still be able to use the same lender, but you’ll need to apply again. If your circumstances have changed in that time, you may also be offered another mortgage deal.

Can I be declined a mortgage even if I have a Decision in Principle?

Yes, you could be declined a mortgage, even if you have a valid DIP. This can happen for a number of reasons:

• You can’t provide the documents needed for your application

• The details you gave on the DIP aren’t correct

• Your debts are too high

• The property you want to buy doesn’t meet the lender’s requirements

• You’ve got into credit issues since getting the DIP

Mortgage rejections can really hurt your credit score. It’s best to only apply to a lender who is likely to approve you. Read more in our Guide: What to Do if You’ve Been Refused a Mortgage.