What Is a Decision in Principle (and Do You Need One?)

A Decision in Principle (DIP), sometimes referred to as an Agreement in Principle (AIP), or a Mortgage in Principle (MIP), is an initial indication from a lender of how much they may be willing to lend you based on a review of your financial situation and a credit check.

It is NOT a formal mortgage offer but gives you a strong ideal of your borrowing capacity and helps demonstrate to estate agents and sellers that you are a serious buyer.

What does a Decision in Principle involve?

 To issue a Decision, a lender will typically carry out a soft search credit check and run an affordability calculation. This will require information regarding your employment status and income, your monthly outgoings and credit commitments, some basic personal details and snapshot of your credit history.

Because we always look to run a DIP based off a soft search, it won’t negatively impact your credit score. This makes it a very useful early step in the home buying process that helps you know what your buying capabilities may be.

Do I need a Decision in Principle?

Whilst a DIP isn’t a legal requirement, it is a practice that it almost always expected by estate agents. Some may ask to see evidence before allowing you to view property, but most won’t require it until you submit a formal offer. The DIP helps to provide reassurance to the agent and the sellers that you have taken steps to be assessed by a lender and that is it likely that you will be able to secure a mortgage.

When should I get a Decision in Principle?

One of the biggest advantages of running a DIP early on is that it can highlight any potential issues before you start viewing properties. There’s nothing worse than finding the home of your dreams then finding out that you are not in a position to buy it.

If there are any issues or concerns on your credit file, these may only become apparent during a DIP or, sometimes, not until a full application has been submitted. Discovering these early gives you time to address the cause before you start to view or offer on properties.

Some lenders could change their affordability multiplier if you have negative marks on your credit file, there may be errors on there that can take time to rectify, or you may have recently paid off some credit that has not yet cleared. There are other factors too that could affect how much you could borrow, or if lenders could make the decision not to lend at all. Identifying these early can save you time, reduce stress and help avoid disappointment later on in the process.

Do I need to get more than one DIP?

In most cased you only need to get one Decision in Principle at a time. Depending on the lender some are valid for 30, 60 or even 90 days. Important to note that, as it is a snapshot of your file, if your circumstances change, it is sensible to arrange for a new decision to be run.

Different lenders use different criteria and different credit reference agencies to help them make a decision. You could decline with one and pass with another with the same information. We will always shop around to find the best lender for you and, when you find a property, that may often be different to the lender we run the initial decision with.

Ultimately, there’s no requirement to obtain multiple DIP’s or to speak to multiple brokers before proceeding. Once you’ve been assessed and have a clear understanding of your borrowing capacity, the information can be used to find your ideal home.

What would you do?

A Decision in Principle is a simple but valuable step in the mortgage process. It provides clarity on your borrowing potential, helps identify any issues early, and demonstrates to estate agents that you’re a serious and prepared buyer.

Because it typically involves only a soft credit check and has no lasting impact on your credit file, there’s little downside to obtaining one sooner rather than later. In fact, doing so can help ensure that when you do find the right property, you’re in the best possible position to proceed without unnecessary delays or surprises.