A Mortgage in Principle (MIP) which can also be know as an Agreement in Principle (AIP) or Decision in Principle (DIP) are all the same thing, it is a provisional lending offer from a mortgage lender.
The AIP/DIP will state the amount the mortgage lender is willing to lend you based on an initial assessment of your financial situation. It’s not a full mortgage offer, but it indicates that the lender is willing to consider lending to you, subject to a full application and further checks.
Key here is that any information that is input at this point is as accurate as possible.
Obtaining an AIP/DIP typically involves the following:
Lender Financial Checks. A mortgage lender will review your basic details including income and expenditure along with accessing your current and previous credit history
Credit check. They will check your credit history either though a "soft" or "hard" credit check (often termed as a footprint). Soft checks don’t affect your credit score, while hard checks might. Most mainstream lenders do a `soft footprint`
Mortgage Loan Amount. Based on the information provided, the lender will give you an indicative estimate of how much you could borrow from them. This is often a maximum amount based on your information provided
Budgeting. This potential loan amount, along with any deposit you have, gives you a great idea on the price range of a potential property purchase
Non-Binding. Crucially here is that the agreement is not legally binding. It doesn’t guarantee you’ll be approved for a mortgage, as the lender will need to carry out a far more thorough assessment during the full application process
Time Limited. An AIP/DIP is typically valid for a few months (e.g., up to 90 days). After this period, you may need to reapply if you haven’t yet found a property or proceeded with a full mortgage application. Or indeed if circumstances have changed
Estate Agents. Most estate agents will ask for a copy of an AIP/DIP when making an offer on a property to prove that you can potentially afford to purchase it
Just Remember though. While an AIP/DIP is extremely useful, it’s only the first initial step. A full detailed mortgage application will need to be completed and a valuation of the property you wish to buy, before a successful mortgage loan is approved.
If you would like to speak to a mortgage broker about obtaining an AIP/DIP contact us at Holistic Mortgages on advice@holisticmortgages.co.uk or 01642 130730.
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