Summarising a Decision in Principle
A Decision in Principle (also known as a DIP, Agreement in Principle, or AIP) is a written summary from a mortgage lender detailing how much they may be able to lend to you and is a helpful first step in your mortgage journey. Lenders will typically ask you to request a DIP before a full mortgage application and require information such as: personal details, and your income/outgoings. This information will be required for anyone who is looking to be named on the mortgage.
A Decision in Principle is helpful to give you an accurate indication of how much you are likely to be able to borrow. The amount a lender can offer you depends on factors such as your income, your credit profile, and the amount of deposit you have available.
Typically, you can apply for a Decision in Principle online, or by phone. Estate agents and sellers may also request to see a DIP before they accept any offer on a property. This is because a DIP usually shows you’re serious about buying a property, and you’re likely to afford the amount you are looking to borrow.
A Decision in Principle is typically valid for between 30 and 90 days. In some cases, it is possible to renew the DIP after this period, otherwise you may have to arrange for a new Decision in Principle from your lender. This is because your personal and financial circumstances may have changed, meaning your lender will want to reassess your application.
Is it possible to get more than one Decision in Principle?
Yes, you can get more than one Decision in Principle. Having a Decision in Principle with one lender doesn’t stop you getting another from a different lender. Different lenders may be able to offer you a different loan amount based on their affordability criteria, and therefore may be worthwhile seeking multiple options. However, it is worth noting while most lenders carry out a soft credit search, some lenders may perform a hard credit check when you apply for a DIP – leaving a footprint on your credit file.
Advantages of multiple Decisions in Principle
Applying for multiple Decisions in Principle from different lenders is possible and there’s no maximum limit. If you receive a decision in principle and you are not satisfied with the outcome, you can apply to other lenders for another Decision in Principle. Lenders may have different affordability criteria which means different lenders may be able to offer a higher or lower loan amount.
Disadvantages of more than one Decision in Principle
When applying for a Decision in Principle most lenders will complete a soft credit check, which does not affect your credit file. However, some lenders may complete a hard credit search, which leaves a footprint on your file for other providers to see.
Too many hard searches on your credit file in a short space of time, can negatively impact your credit score. This could further impact you when applying for a full mortgage application, or other lending as it may indicate you are desperately searching for credit. It is worth checking with each lender before completing a Decision in Principle what credit check they are performing.
Work Out Your Affordability with The Tipton
If you’re looking for your first home, you will need to find out how much you could borrow. If you’re not ready to complete a DIP, our online affordability calculator can give you an idea of how much you could afford to borrow and what your monthly payments could look like. Our affordability calculator will also list mortgage products that may be available to you.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.