What is a Decision in Principle?
When you’re buying your first home, you’ll come across lots of new words and phrases that you might not quite understand. A Decision in Principle is often one of these phrases.
So, what is it?
A Decision in Principle can also be referred to by some lenders as an Agreement in Principle, a Mortgage in Principle, or a Mortgage Promise. It’s effectively an indication from your mortgage lender of the amount of money that they might be able to lend you for your mortgage.
It isn’t legally binding, and may change once the lender looks into your financial situation.
When you apply for a Decision in Principle, the mortgage lender may consider any debts or missed payments that you have, or any discrepancies in your file. They’ll also need to ensure that you meet their criteria. Each lender has different criteria that you’ll need to meet before they’ll agree on a Decision in Principle or a mortgage.
What Happens Next?
A Decision in Principle generally lasts between sixty and ninety days, although this varies from lender to lender.
After you’ve received a Decision in Principle, it’s time to browse for a house! If you’d like to make an offer on a property, refer to your Decision in Principle for guidance on the maximum amount that you can afford.
Following this, you’ll need to make a full mortgage application with your lender. If the lender is happy to go ahead with your mortgage, you’ll receive an official mortgage offer. This informs you of the amount that the lender has agreed you can borrow. This may be different to the amount given in your Mortgage in Principle, depending on the details included in your full mortgage application.