A MIP can also be called an Agreement in Principle, or Decision in Principle, a Lending Certificate or mortgage promise. A Mortgage in Principle is a confirmation from a lender that they’re willing to lend you a certain amount of money to purchase a property.
It confirms that they’d be happy for you to borrow from them.
The MIP takes into account whether you can afford to borrow the amount that you’re wanting to, based upon your income and regular outgoings, as well as the results from a soft credit check and any other lending criteria.
You need to submit one before you can submit a full mortgage application, and they typically last 30-90 days, depending on the lender.
MIPs are a strong indication of whether you’re likely to be approved, as long as you meet the criteria set out by the lender who you apply with. It can help you get an indication of the size of mortgage you’re eligible for, which helps you determine how much deposit you’re going to need and the options that are available to you. This is particularly important if you have bad credit or are self-employed, so you can have a bit more certainty about what’s available to you.
It can also make the process with estate agents smoother, as they’ll often want to see your DIP to know you’re serious enough for them to take the property off the market.
But there are some things a MIP is not:
A mortgage offer
A guarantee to be approved
Specific to a property
A guarantee of amount you can borrow
A commitment to the lender that’s given you a DIP
With these in mind, it’s possible that you can get a MIP and then have your mortgage rejected.
A big reason for this is because the process to receive a MIP is just a soft search, so your credit isn’t checked in full detail (known as a ‘hard search’). While this is good - as it means that other lenders in the future won’t know that this search happened. It can also mean that deeper credit issues aren’t picked up until after when a hard-check is run.
Although it can be disheartening, especially after receiving a MIP, it’s important to remember that it’s not the end, and there’s always options you can take to try and improve your chances of getting your mortgage approved.
There’s a number of reasons your mortgage might be declined even after you’ve got a MIP:
You can’t provide the documents needed for your application or there’s an error on your application
The lenders suspect fraud
The details you gave on the MIP aren’t correct
Failing the final credit check
The property you want to buy doesn’t meet the lenders’ requirements
You’ve got into credit issues since receiving your DIP or your situations have changed
The most important thing to remember is not to panic. A “no” from one mortgage lenders doesn’t equal a “no” from all of them. Here’s what to do next:
Find out why you were refused
After receiving a MIP and then being rejected for a mortgage, it can be confusing and feel unfair. It’s important to speak to the lender or broker to understand why you were rejected, and see if there’s anything you can do.
Get advice from a specialist
This is generally our advice for most situations with our customers. Often, the mainstream banks and lenders use computer says “NO” systems where they reject anything which doesn’t fit into their strict boxes. That’s why it’s useful to speak to a specialist broker. We have access to lenders that will be suited to your circumstances, and we can talk you through the whole process to see what we can do to make sure your mortgage isn’t rejected.
We understand that being rejected at any point in the mortgage process can be disheartening - but it doesn’t mean it’s the end. It’s important to remember that although MIPs are a key part of getting a mortgage, they aren’t promises of the amount you can be loaned or of approval at all.
We’d recommend that you speak to a specialist like us, so we can really understand your circumstances and give you the best chances of getting a mortgage. A huge number of our customers have been rejected in the past, and come to us feeling like there’s no hope - there always is.
Our Mortgage Experts are fully-qualified with experience in bad credit, self-employed and complex mortgages. They have a proven track record of getting mortgages for people who’ve been rejected elsewhere.