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Before applying for a mortgage, and often before making an offer on a property, you’ll need a Decision in Principle (DIP). This is also known as an Agreement in Principle (AIP) or a Mortgage in Principle (MIP).
The aim of an Decision in Principle is to give you a clearer idea of how much you could afford to borrow, so that you can browse properties in the correct price range…and eventually when you are ready, put an offer on one! Also some estate agents may insist that you have one before showing you available properties.
If you’ve got a Decision in Principle ready, you can show sellers that it’s likely you’ll be able to afford the property that you want to purchase. This could help if they’re deciding between you and someone else.
Getting a Decision in Principle involves a credit check, and getting numerous credit checks can adversely affect your credit score.
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When you apply for a Decision in Principle the lender will run a credit check to assess your eligibility.
The lender can run a ‘hard’ search that will leave a ‘footprint’ on your credit file that will be visible to other lenders.
If there are a high number of hard searches in a short period of time, it can have a negative impact on your credit score.
However, if the lender runs a ‘soft’ search, it won’t leave a footprint and it won’t impact your credit score.
To better understand your credit score, you can request your credit report from credit reference agencies such as Check my File, Experian or Equifax.
What information will I need for DIP?
A Decision in Principle won’t require as much detail as a full mortgage application but you will need to provide the following:
- your personal details
- three years of UK address history
- basic annual salary
- any other income sources, e.g commissions, bonus, overtime and maintenance or benefits you receive
- details of your financial commitments, e.g. loans, credit cards, leases or childcare costs
- if you’re applying with someone else, you will also need their details as well.
Is an Decision in Principle guaranteed?
A Decision in Principle is not a guarantee that you’ll get a mortgage offer. You will still need to go through a full mortgage application when you find the property that you want to buy or remortgage.
A Decision in Principle is normally valid for for between 30 & 90 days.
Contact Cherrywood Mortgages now, your friendly local Nottingham Mortgage Broker