A Decision in Principle is sometimes also referred to as:
an Agreement in Principle
a Mortgage in Principle
a Mortgage Promise
Factors that may be considered include:
debts, missed payments or arrears
lack of consistency and discrepancies in your file
not meeting your lender’s specific criteria
A Decision in Principle makes it easier for you to start ‘shopping’ for a home. You’ll have a clear idea of what your budget is and you can show it to estate agents to prove you’re a serious buyer.
This will be decided by your mortgage lender, however, they typically last anywhere between 60 to 90 days.
Once you’ve found a property you like, you may wish to make an offer on it – up to the maximum value you can afford, based on your Decision in Principle.
You must then go back to your mortgage lender and make a full mortgage application. If everything is satisfactory, your lender will make you an official mortgage offer.
The official mortgage offer tells you the amount you can borrow from your lender for your chosen property. Your mortgage lender will send a copy of your mortgage offer to your solicitor or licensed conveyancer.
This is typically because of the results of the affordability assessment or mortgage valuation. So, for example, if the value of the property is lower than your Decision in Principle.
You can typically get a Decision in Principle on the same day you apply.
Many lenders let you apply online. This makes it easy for you to enter your details and set the terms of the mortgage you want. You can also receive a decision instantly.
The application process will be different for every lender. For example, some lenders may prefer you to complete an application over the phone or in branch.
You may need:
proof of income, such as payslips or bank statements
two years’ worth of accounts, if you are self-employed
proof of your current address
proof of identity, such as a passport or driver’s licence
Your property may be repossessed if you don’t keep up repayments on your mortgage.