Mortgage Decision in Principle

If you’re planning to buy a property, one of the first steps is getting a mortgage decision in principle. This gives you an indication of how much you can borrow and shows you’re a serious buyer. Here, we explain what a decision in principle is, whether you need one, how the process works, and what to do if you’re declined.

What is a mortgage decision in principle?

A mortgage decision in principle (DIP), sometimes called an agreement in principle (AIP) or mortgage in principle (MIP), is an initial indication from a lender confirming how much they may be willing to lend you based on some basic information.

It’s not a formal mortgage offer, but it shows that a lender has carried out a preliminary affordability assessment using details such as your income, credit history, and obvious financial commitments.

Estate agents often ask buyers for a decision in principle before allowing them to make an offer on a property because it demonstrates that a lender has already carried out some initial checks and you’re on the right path to securing a home loan.

Do you always need one?

A mortgage decision in principle isn’t legally required to apply for a mortgage, but in practice, it’s often requested during the property buying process.

Many estate agents prefer buyers to have a decision in principle before viewing properties or submitting an offer. This helps reassure sellers that you are financially capable of securing a mortgage.

Getting a decision in principle can also give you a clearer idea of your borrowing capacity, so you can focus your property search within a realistic price range from the get-go.

How to get a mortgage decision in principle

Getting a mortgage decision in principle is usually a relatively quick process and can often be completed online or through a mortgage broker within minutes.

Lenders typically ask for basic information about your finances and circumstances, including:

• Your income and employment: You’ll need your basic salary and employer details. It’s also worth having any related information, such as bonuses, benefits, pensions or investment income.

• Monthly expenses and debts: You should provide a general overview of your monthly spending, including typical outgoings such as rent, travel or commute costs, credit cards, finance and loans, childcare, and school fees.

• Estimated deposit size: You might not need to prove how much you have at this stage, but it’s worth knowing your realistic deposit estimate and having a clear explanation about the source of your deposit.

• Overview of your credit profile: Lenders may perform a soft credit search (a few will carry out a hard credit search) to get a snapshot of any outstanding bad credit issues.

• Personal details: You’ll likely need a form of ID, your UK address history, your NI number, and potentially other basic personal information (depending on the lender).

Why use a mortgage broker for a decision in principle?

You can get a mortgage decision in principle directly from some lenders, but not all of them. And because each lender has different criteria, it’s important you approach the right one for your circumstances.

This is why it’s much more efficient to get a mortgage decision in principle through a broker because they can access the whole market, and you’re not tied down to one lender.

Working with a mortgage broker at this stage can also help ensure the most appropriate lender is selected before any credit searches take place to avoid any unnecessary rejections or marks on your credit file.

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What to do if your mortgage decision in principle is declined

If your mortgage decision in principle is declined, it’s important not to submit multiple applications to the same lender (or different lenders) straight away. Multiple credit searches in a short period can negatively impact your profile and reduce your chances of approval.

Instead, it’s usually best to speak with an experienced mortgage broker who can review the reason for the decline and identify lenders more suited to your circumstances.

Decision referral

In some cases, an application may be “referred” rather than declined outright.

This means the lender’s automated system couldn’t make an instant decision, and the application will be reviewed manually by an underwriter. Referrals can have varying turnaround times, but a skilled broker can often provide additional context or documentation to support your application.

Do all mortgage lenders offer decisions in principle?

Most UK mortgage lenders will provide some form of decision in principle or agreement in principle, although the process and criteria can vary.

Certain lenders offer instant online decisions, while others rely more heavily on broker submissions or manual underwriting.

Here are examples of well-known lenders and their general approach towards an online mortgage decision in principle:

Get a mortgage decision in principle today

Getting your mortgage decision in principle is an important early step when buying a property and it’s worth taking the time to put your best foot forward.

Because lender affordability criteria and policies vary significantly, obtaining a mortgage decision in principle through a broker can help ensure you apply with the most suitable lender straight away, with the option to change later if you need.

Here’s why homebuyers across the UK use Money Helpdesk when arranging a mortgage decision in principle:

• Access to experienced mortgage advisors

• Get a decision in principle as fast as possible

• Free initial chat with no obligation to proceed further

• Whole-of-market access to the complete range of lenders

If you’d like to get a mortgage decision in principle or compare lenders based on your personal circumstances and type of property, you can get started here.