The decision in principle is often underestimated with people looking to buy a property. The reality is that getting a decision in principle is vital as you set out on your home hunt as is always advisable to reach out to a mortgage broker or lender as you start viewing properties to get this carried out.
So what is a Decision in Principle? –
Its a simple process that calculates your credit worthiness, affordability and commitments that gives you an indication of obtaining a mortgage and what sort of mortgage options you have going forward. It is carried out by a mortgage broker or lender once they have taken the basic details about you and your circumstances. It takes around 10-15 minutes for an adviser to gather the information required and the result of your decision in principle should be communicated back to you relatively quickly, depending on the complexity of your circumstances.
So why is it important? –
If you are serious about buying a property then the decision in principle is vital. If you pass the decision in principle checks you will be provided a certificate illustrating that you are able to gain the lending required. This is important for viewing, declaring interest and putting offers in for property. It shows to the seller and the estate agent your intent to buy put more importantly shows to them that you are able to proceed. It is very common that where there are a number of interested parties for the property that the seller will go with a buyer that have supplied the decision certificate over a buyer that has not previously obtained this, even if the buyer with the DIP goes in with a lower offer. This is because the seller wants as much confirmation as possible that things wont fall through further down the line.
It also gives the buyer piece of mind when viewing and offering on property. You will know exactly what you are able to afford rather than viewing aimlessly to only find out what you are viewing or offering on is outwith your budget or perhaps you on the flip side you could get borrow more than you initially thought. Your mortgage adviser will talk through all your options with you.
Other points to note…..
It is important the information you provide your lender or broker is as accurate as it can be, especially when it comes to income, address history and commitments. All the information you give is subject to verification by the lender and if the information is incorrect it may effect your ability to obtain the mortgage you thought you were able to get. Its an awful situation when a client is able to obtain a decision in principle only to be refused at application due to certain information being inaccurate on review of documentation. A decision in principle is no guarantee of a mortgage offer, but if you provide all the correct information it is a big step that is for sure!!