A guide to decision in principle (DIP)

Have your heart set on a place of your own? When looking to buy a home, you might need a Decision In Principle. But what is it & why do you need one?

What is a decision in principle (DIP)?

A Decision In Principle (DIP) is a certificate or statement from a lender that says ‘in principle’ they would be willing to lend a certain amount of money to you as a prospective borrower.

It can also be called a Mortgage Promise, Lending Certificate or a Agreement in Principle (AIP)

Why do you need a decision in principle?

A DIP is usually undertaken before you submit a mortgage application or before you make an offer on a property.

Having a DIP shows that you can, in theory, afford a property, which makes you a more attractive and reliable buyer. This can help you stand out from other prospective buyers, which can be invaluable if the types of properties you are looking for are in competitive, high demand areas.

A DIP can also add reliability to your credit file if you have historic credit issues or if you have a limited credit history.

How to get a decision in principle?

In order to get a DIP, you will need to supply a certain amount of basic information to a lender. This information will allow the lender to check your credit history to see if you are a reliable borrower and if they should consider lending you a certain amount of money. You can request a DIP at any point during the process of obtaining a mortgage from your mortgage adviser or directly from your lender. It is normally very quick to do, and can often be done online, over the phone or face-to-face. You will need to supply:

Basic personal details
Information about your income and expenditure such as earnings
Potentially documents as evidence to support the above information, such as bank statements

You can usually get a DIP within 24 hours and is usually valid for up to 90 days. Although DIPs tend to be free, some advisors may charge for this, so it is worth double-checking beforehand.

Things to be aware of

A DIP is not a guarantee that you will be granted a mortgage. It is entirely possible that when you go through the full mortgage application process that your lender may look at your earnings and credit file in more depth and decide to not lend to you.
DIPs can sometimes affect your credit rating. Although some lenders offer DIPs that do not affect your credit score or only leave a soft imprint on your credit history, others will leave a harder imprint. This could happen if you have several credit application searches over a short period of time. This could have a negative impact on your credit score and influence your ability to acquire a mortgage later on.
If a considerable amount of time has passed between securing a DIP and beginning a mortgage application, the rates and mortgage deals might have changed. This could impact your ability to lend or who you choose to lend from.

Important Note

All information contained in this website is provided as a guideline only, is based on estimates and assumptions, may not be accurate or complete, and is subject to change. We make no representations or warranties with regards to this information, expressed or otherwise. A buyer who relies on such information does so at their own risk. Buyers are advised to seek independent financial advice and should undertake their own due diligence.

Your capital is at risk. Property values may decline and the property might not be able to be rented at amounts sufficient to cover debt interest costs, operating expenses and liabilities, and might not result in a positive cash flow. Property is an illiquid asset and should not be viewed as a short-term investment.

In no event will we be liable for any loss or damage, including without limitation any loss or damage arising directly or indirectly out of or in connection with the use of this website and the information contained therein.

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