A Decision in Principle (DIP), also known as an Agreement in Principle (AIP) or Mortgage in Principle (MIP), is an informal decision made by a mortgage lender confirming the maximum they are willing to lend based on specific initial checks.
These include:
- Affordability, such as how much you can borrow based on your income.
- Outgoings, and other factors like financial dependants.
- Borrowing history and current credit score.
These standard ‘soft’ checks will not affect your credit rating, and allow you to approach multiple lenders before submitting a full mortgage application.
Why Do You Need a Decision in Principle?
It’s important to remember that a Decision in Principle is not the same as a mortgage offer or guarantee that a full application will be accepted.
So why would you need one?
- A Decision in Principle provides an indication of an approximate maximum loan amount, which can help you decide what property prices you can afford.
- An estate agent will ask to see a DIP when you make an offer on a property as proof that you can proceed with a mortgage.
- It gives you peace of mind knowing that you have passed the basic checks for that particular mortgage lender.
So it’s really important to get a Decision in Principle before you put an offer on a property, otherwise it could delay the chances of having your offer considered.
How to Get a Decision in Principle
To get a decision in principle, you simply have to apply directly with your chosen lender via their website or through a mortgage broker.
The lender will usually issue a DIP certificate the same day and need the following information when you apply:
- Proof of address and identity.
- Income details, such as salary, investments, or 2 years of accounts if self-employed.
- Borrowing details such as credit cards, finance, and loans.
- Outgoing details, such as travel expenses and childcare fees.
NOTE: Just because you’ve obtained a certificate from one particular mortgage lender, doesn’t mean you will be automatically accepted by another. Each has its own affordability criteria and credit scoring system.
How Long Does a Decision in Principle Last?
If approved, most DIP certificates will be valid for between one and three months.
If it expires before you have made a full mortgage application, it’s easy to extend or reapply without affecting your credit file.
| Lender | DIP Length |
| Barclays | 90 days |
| Halifax | 90 days |
| HSBC | 90 days |
| Lloyds | 90 days |
| Nationwide | 90 days |
| NatWest | 30 days |
| Santander | 60 days |
| TSB | 90 days |
| Virgin | 90 days |
What Happens After a Decision in Principle is Issued?
Once you’ve received your DIP certificate, you can use it to support an offer on your chosen property.
Once an offer is accepted, you will have to submit a full mortgage application to the lender.
If that is successful, you will receive a mortgage offer letter confirming the exact loan amount available for your property.
Can a Mortgage Application Be Declined After a Successful Decision in Principle?
Yes, a decision in principle is not a guarantee of acceptance.
Some common reasons for a mortgage application being rejected despite receiving a DIP are:
- The DIP application contains inaccurate or missing information.
- Your personal or financial situation changes after receiving a DIP.
- The affordability or acceptance criteria change for a particular lender or mortgage.
This is when the experience and market knowledge of an independent mortgage broker can help you avoid the disappointment and delay of a rejected application.
How to Increase the Chances of DIP and Mortgage Application Acceptance
What many mortgage applicants don’t realise is that not all lenders and mortgage products have the same acceptance criteria.
Although you can get a Decision in Principle directly online, it’s vital that you match your circumstances to the right lender and mortgage to avoid disappointment.
To ensure you have the best chance of a successful result, click here to discuss your mortgage needs so we can provide you with a quick and accurate Decision in Principle certificate.
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