Mortgages.scot

Having a decision in principle from a lender is a great benefit when you are looking to purchase a property. It offers confidence to you and also the seller of a property that you are in a good position to make the sale happen smoothly.

But you need to apply some caution to the process. It is important to understand that whilst a DIP (Decision in Principle) is generally reliable, it is not a guarantee you will get a mortgage.

Also worth noting it can sometimes be referred to as AIP (Agreement in Principle).

What is a Decision in Principle?

These days the process will be completed online. Most lenders offer the service where you will complete a form, answering a series of questions related to the following;

• Applicant details
• Income
• Outgoings

The lender will carry out a soft credit search. That is only you will see the search, it will have no impact on your credit record.

The lender is basing its decision on the information you give them without any evidence to support the figures you have provided. So you must ensure they are accurate.

If you have a mortgage figure in mind the decision will be based on that figure otherwise they will offer an indicative mortgage amount they may be willing to lend as a maximum.

What a Decision in Principle is not

It is not a guarantee. That is key to bear in mind.

Once you actually apply for the mortgage properly the lender will require all the supporting documents before committing to the mortgage, as an example this will include:

• Pay slips
• Bank Statements
• Bonus evidence
• Accounts
• Another credit search

If any of these documents provide information that was not known during the DIP/AIP process then it may change their view.

Things like a commitment you did not disclose are where it could mean the lender still offers you a mortgage but a lower amount.

Being careful to understand what commitments are will help greatly. Refer to my guide here. Something like a nursery or after school fee for a child would be considered a commitment to a lender if it believes you will pay it for several years to come.

Bottom line

When applying for a Decision in Principle make sure you miss nothing out during the process.

By doing this you will ensure that when the time comes to actually apply for the mortgage the lender will have no reason to make any adjustments to the amount they are willing to lend.