What is a Decision in Principle and how do I get one?

What is a decision in principle?

A decision in principle, sometimes referred to as an agreement in principle or mortgage in principle is confirmation from a lender that they can lend to you – in principle. They offer this by taking some basic information and does not guarantee they will offer you the mortgage.

A decision in principle is usually one of the first steps you take to becoming a homeowner. It gives you and the estate agent confidence that your mortgage is likely to be approved. Most lenders only carry out a soft credit search on you meaning your credit score will not be affected. They will also assess your income and outgoings to ensure that the mortgage amount is affordable.

Usually the lender will produce a certificate, which you can then send to the estate agent selling the property you wish to buy. We’ve seen an increase in estate agents asking for decision in principles to view a property since COVID, so it’s important to get this before considering buying a property.

Will it affect my credit rating?

The majority of lenders carry out a ‘soft’ credit search on you, which will not affect your credit score. If we are looking to approach a lender who carries out a ‘hard’ credit search which will leave a footprint therefore affect your score, we will discuss this and get your consent prior to running the DIP.

How long are they valid for?

It depends on the lender we run this with, but they’re often valid for between 1-3 months. Don’t worry if you don’t find a property in time, it usually only takes a few minutes to refresh this, providing your circumstances haven’t changed.

What do I need to provide?

We will require you to complete an online questionnaire/fact find. This includes basic personal information such as your address history, employment, details of any credit commitments you have and a budget planner. This is all done on our online portal and all of your information is kept secure and confidential. We may sometimes require income proof in order to run a decision principle such as a payslip.

How long does this process take?

From you completing the online questionnaire to us getting a decision in principle can take only a matter of hours. It does depend on who the lender is and whether they ask for any further information before making a decision. If successful, most decisions are instant.

What happens if I get declined?

If your decision in principle gets declined, it doesn’t mean it’s the end of the road for you. Firstly, as mentioned in our previous point most will only be a ‘soft’ credit search therefore you won’t be affected. If in the event your decision in principle is declined based on your ‘credit score’, we will often ask you to run a credit report for us to assess further. We look for any obvious reasons it’s declined and will then decide what lender to approach next.

Do you charge for a Decision in Principle?

No. We only charge our broker fee at the point you proceed with a full mortgage application and not at the decision in principle stage.