What is a Decision in Principle?

fa-homebuyers ["Mortgages Explained"]
A Decision in Principle is a sign from a mortgage lender that they may be able to offer you a mortgage. They will perform a “soft” credit check to look at your credit history. It is also known as a Mortgage in Principle or Agreement in Principle.

How does a Decision in Principle work?

To get a Decision in Principle, you will need to tell your lender about yourself. You’ll need to tell them: 
  • Your income – Tell them about your job and how much you earn. 
  • Your outgoings – How much you spend a month on things like childcare, rent or existing mortgages.
  • Credit or loans – Any borrowing you might have.
  • Previous addresses – They will want to know where you have lived for the past few years.

Why get a Decision in Principle?

A Decision in Principle can help when you start house hunting. You’ll know what the top end of your budget could be and you can be more confident about being given a mortgage. It also shows a seller that you’re serious about buying a home.

You will also need a DIP if you want to switch your existing mortgage to a new lender.

When should I get a Decision in Principle?

Once you are ready to start looking for your new home, that’s the time to get a Decision in Principle. 

Or, if you’ve already got a mortgage, you will need one to switch your mortgage to a new lender.

How long does a Decision in Principle last?

As long as your finances stay the same, a Decision in Principle usually lasts from 30 to 90 days.

It’s always worth checking with your lender, as they will have different rules.

If your situation changes while you look for a home – for example you take out a loan, or your wage goes down – your Decision in Principle may not still be valid. 

Can you get more than one Decision in Principle?

You can get more than one Decision in Principle from different lenders.

Having a Decision in Principle from different lenders could give you more options when you come to apply for a mortgage.

Does a Decision in Principle affect my credit score?

Most lenders do a ‘soft’ credit check to see if they’ll give you a Decision in Principle. This is different to a ‘hard’ credit check and shouldn’t affect your credit score.

This ‘soft’ credit check looks at your income and outgoings. This includes your salary, loans and any credit you might be using.

Some lenders do a ‘hard’ credit check though, which may temporarily lower your credit score. Always check with each lender whether they do a ‘soft’ or ‘hard’ credit search when you apply for a Decision in Principle. 
The content on this page is for reference and is not financial advice.
For impartial financial advice, try MoneyHelper.