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Mortgage decision in principle: What does it mean?
When you're applying for a mortgage, especially for the first time, there can be many terms you don't understand or are hearing for the first time.
This article looks at what a Decision in Principle is and where it fits on your journey to homeownership.
A Decision in Principle is a written summary from the mortgage lender detailing how much they may be prepared to lend you. Sometimes referred to as an agreement in principle, a mortgage in principle of a mortgage promise, a decision in principle is the first stage of your mortgage application.
Lenders offer an agreement in principle before they have your full application, which means it is not an official mortgage offer, and you could still be declined on your full mortgage application.
This doesn't mean you shouldn't apply! There are many benefits to getting your agreement in principle early on in the process, and with Teito, it's easy!
We compare the best deals from 90+ lenders to find the right mortgage for you. Getting started is simple, apply online now - you can manage everything from the comfort of your own home. No more paperwork or time-wasting appointments!
What does approved in principle mean?
A positive agreement in principle means that you have passed the lender's initial checks that they make with credit reference agencies.
This is the quickest and easiest way for a mortgage lender to assess your credit rating and whether you are a reliable borrower.
Their overall aim is to see whether you have the capacity to commit to long-term mortgage repayments - and your credit history is a good place to start.
What do I need to get a mortgage in principle?
The information you'll need to provide will vary from lender to lender but typically involves:
Proof of your identity, such as a passport or driving license
Proof of income, such as payslips or bank statements
Proof of address
If you're self-employed, you may need to provide 2 years of company accounts.
Does a mortgage in principle count as a hard credit check?
No, applying for a mortgage in principle will only be classed as a soft credit check; however, your full application will be classed as a hard search.
Does a decision in principle guarantee a mortgage?
No, a decision in principle is not legally binding.
Mortgage lenders will thoroughly assess your application at the next stage of the full application process. Your full mortgage application will take into account additional factors such as:
The property that you're buying
Your income and expenses
Other financial commitments and your personal circumstances
How long does a decision in principle take?
You can get a decision in principle in minutes!
Apply for a mortgage now online with Teito, and we promise it will be a quick and easy process.
What happens after a mortgage in principle is approved?
Once you have been approved for a mortgage in principle, you can take it to the next stage and find your perfect home!
After you've had an offer accepted, this is when you continue on and make your full application
Get started on your mortgage journey with us
Why you should get a decision in principle
It can help to show vendors that you're a serious buyer.
Once you've got your decision in principle, you are in a better position when it comes to house-hunting.
In fact, especially in a competitive market, there are some estate agents who will only offer viewings to people who are pre-approved for a mortgage.
You will have an idea of how much you could borrow.
Getting a decision in principle early on will give you a good indication of how much you can borrow.
This will help to narrow your search, as well as put you in a better negotiating position with a seller or if there are offers from multiple buyers.
How long does a Decision in Principle last?
The validity of your mortgage in principle will vary depending on the lender, although they typically last between 60 and 90 days.
Reasons why your decision in principle may be declined
There are several reasons why you may be declined.
Your credit file shows adverse credit, excessive debt, missed payments or arrears.
Severe credit issues on your credit report can be a red flag for some lenders.
The good news is that there are providers who specialise in offering mortgages to people with bad credit. If this is you, your best chance of getting approved is with an experienced mortgage broker.
Another reason is that you don't meet the eligibility criteria for a mortgage.
A lender can decline your application if you don't meet certain lending criteria, such as having a minimum income.
This doesn't mean your application is automatically declined though - many lenders will still look at your case and not all lenders have the same requirements.
You've been declined by other lenders before
You may have been declined before for a mortgage, and although doesn't mean you'll be automatically rejected this time, it makes approval less likely.
The same factors that were responsible for you being declined may still be present. For example, if your income was too low to support a mortgage last year - it could well still be too low now.
To boost your chances of getting a decision in principle or even a fully approved application, speak with an experienced broker today.
Tips for getting an agreement in principle
Your best chance of getting an agreement in principle approved is with an experienced mortgage broker. Not only will they know the right lender for your situation, but they can also help with your application.
Approaching the right lender is vital; if you're declined by one mortgage provider, it makes it more difficult to get approved in the future.
Get your mortgage in principle now
At Teito, we work with 90+ lenders offering more than 20,000 mortgage deals.
We've streamlined the application process to be as easy and quick as possible.
You can apply online, and get your agreement in principle in minutes. With our team of experienced mortgage brokers, you're in good hands.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.