getting a decision in principle (DIP)

If you're in the process of purchasing your first home or selling your current property to move onto your next one, obtaining a Decision in Principle (DIP), also known as an Agreement in Principle, Mortgage in Principle, or Mortgage Promise, can be instrumental. This document signifies the amount of money a lender is likely to offer you based on the initial information you've provided to them.

While a DIP is not a legal requirement, many estate agents now require potential buyers to have one. This requirement demonstrates both serious intent and financial capability. However, it's important to note that the eventual offer amount may change following a more comprehensive assessment of your income, spending habits, credit score, and other relevant factors.

The application process for a DIP typically involves a soft credit check, which does not impact your credit score. Various factors, including debts, missed payments, and meeting the lender's criteria, are considered during this process.

Having a DIP can streamline the house-hunting process by providing a clear budget estimate. It also serves as evidence of your seriousness as a buyer when presented to estate agents. Generally, a DIP remains valid for 60 to 90 days, depending on the lender's policy.

Once you've found a property within the range of your DIP and made an offer, you'll need to return to your mortgage lender to submit a full mortgage application. Upon approval, you'll receive an official mortgage offer outlining the loan amount for your chosen property. This offer will be shared with your solicitor or licensed conveyancer.

It's essential to understand that your official mortgage offer might differ from your DIP based on factors such as the affordability assessment or mortgage valuation, especially if the property's value is lower than initially estimated.

Applying for a DIP is typically straightforward and can often be completed online the same day you apply. However, the application process may vary by lender, with some preferring phone or in-branch applications. You'll likely need to provide proof of income, current address, and identity, along with additional documentation such as payslips, bank statements, and, if self-employed, two years' worth of accounts.