Getting A Decision In Principle/ Agreement In Principle DIP

Podcast Hosts:

Gemma – Host

Ifthi – Accountant, Mortgage Advisor & Founding Director at WIS

Introduction

Gemma:

Today’s topic: Decision in Principle (DIP), also known as an Agreement in Principle (AIP).

We’ll cover:

• What a DIP is
• When you’ll need one
• How it impacts your mortgage journey

Q&A Discussion

Q1: What is a Decision in Principle (DIP) or Agreement in Principle (AIP)?

Ifthi:

Terms like Mortgage Promise, Mortgage in Principle, Decision in Principle, Agreement in Principle → all mean the same thing.

A DIP is a promise from the bank showing how much you can borrow.

It’s not a guarantee, because it’s still subject to:

• Document checks
• Accuracy of the information provided
• A property valuation

It’s usually given as a letter – the closest you can get to a mortgage offer before a full application.

Q2: When Do You Need a DIP?

Ifthi:

Ideally, before house-hunting.

It tells you how much you can borrow, so you don’t waste time looking at unaffordable homes.

It also gives you confidence in your budget.

Many estate agents insist on seeing a DIP before:

• Allowing viewings (especially during Covid)
• Submitting an offer

Q3: Who Issues a DIP?

Ifthi:

Banks issue DIPs.

Mortgage advisors help by:

• Finding the most suitable lender
• Applying for the DIP on your behalf
• Providing you with either the lender’s letter or one on the advisor’s letterhead.

Q4: Does a DIP Strengthen Your Position When Buying?

Ifthi:

Yes. Estate agents often won’t:

• Show houses without a DIP
• Submit offers without one

Having a DIP shows you’re a serious and credible buyer.

Q5: What Do Lenders Require for a DIP?

Ifthi:

At this stage, no documents – just information.

But accuracy is key:

• Salary (basic vs. commission/bonuses makes a big difference)
• Expenses (including unusual or expensive hobbies)

Advisors often ask to see payslips, bonus statements, or bank statements anyway → ensures accuracy.

Otherwise, the DIP might give an inflated number that’s unrealistic.

Q6: How Long Does a DIP Last?

Ifthi:

Depends on the bank: 30 days to 4 months.

Most high street banks: around 3 months.

Brokers choose the validity depending on whether you’re early in the process or close to purchase.

Q7: Can a DIP Be Extended?

Ifthi:

Yes, you can extend or re-run a DIP.

Warning: avoid running too many DIPs in quick succession → can affect your credit score.

Better to stick with one lender at a time unless guided otherwise by an advisor.

Q8: Should I Choose the Lender with the Cheapest Rate for My DIP?

Ifthi:

Not necessary.

A DIP is just to confirm borrowing potential.

Advisors usually:

• Choose lenders who do a soft credit search (no footprint on your file).
• Find the best actual mortgage deal later at application stage.

Mortgage offers can be switched to a better lender if deals change.

Q9: Does a DIP Affect My Credit Score?

Ifthi:

Soft credit searches: No impact.

Hard credit searches: Can impact your score.

Too many soft searches in a short period can add up and appear as a hard search.

Advisors will guide you on which lenders use soft vs. hard checks.

Q10: Are There Times You’d Use a Lender with a Hard Credit Search?

Ifthi:

Yes, in some cases:

For example, if your offer has already been accepted and only one lender fits your circumstances, and they do hard searches.

Usually though, advisors try to avoid this where possible.

Q11: Do You Have to Pay for a DIP?

Ifthi:

Banks: usually don’t charge.

Brokers: it depends – some charge, some don’t.

At WIS, policy is:

• Free initial consultation
• Free DIP
• Free mortgage application

Some brokers may charge at the DIP stage, or later at application/completion – so always clarify upfront.

Closing Remarks

Gemma:

Always check with your advisor or broker whether these points apply to you.

If you don’t have a broker, WS is always happy to help.

Reminder: A mortgage is secured against your home or property, and it may be repossessed if you do not keep up with repayments.