A Decision in Principle (DIP) may also be referred to as a ‘Mortgage Promise’ or an ‘Agreement in Principle’ (AIP). This is basically a certificate from a lender, stating what you may be able to borrow an amount based on credit history and financial health.However, this is not guaranteed and is subject to satisfactory evidence of income, outgoings and property value.
DIPs are carried out by a lender prior to an application being made. The information provided allows the lender to check the credit file and establish whether they can provide a prospective borrower a mortgage and the amount they are able to lend.
DIPs can be very usefully when trying to establish the amount you can lend and the type of house you are able to afford. Some estate agents like to see a valid DIP prior to an offer being made, as evidence that you are able to obtain a mortgage and afford the house you wish to buy.
A Decision in Principle is submitted prior to a full application. It is free of charge and a decision can be immediate, however sometimes lenders may require further information and in these cases it may take up to 24 hours to get a decision. Most lenders require three years of address history and details of all income and outgoings. DIPs are usually valid for up to 90 days.
Decision in Principle Pros
- It shows that in theory you can afford to buy a property.
- It could give you added reassurance around your borrowing prospects.
- Some estate agents prefer buyers who can provide a DIP upon offering on a house.
Decision in Principle cons
- A DIP is not a guarantee, upon a full application the lender will look at earnings and credit history in more detail and could decide not to lend at all.
- Most DIPs leave a soft footprint on your credit file, however if numerous DIPs are applied for it could affect your credit rating
A DIP is not a guarantee. You need to make a full mortgage application to confirm the amount you can borrow.
Here at FundU we can help make the DIP process as simple as possible..