Getting a mortgage and buying a new property is regularly said to be one of the most stressful things you can do, and for good reason. There are a lot of pitfalls and difficult decisions that can either cost you a lot of extra money or even prevent you from buying your dream home. One of these is the question, “can you get more than one decision in principle?”.
Yes, you can get more than one decision in principle. However, there can be issues if you apply for more than one such as a reduction in your credit score and being denied a mortgage for previous applications. In this post, I’ll explain what to look out for.
What is a Decision in Principle?
A decision in principle (DIP), also known as a mortgage in principle (MIP) or an application in principle (AIP) is a non-legally binding mortgage offer from a lender with the amount they’re willing to let you borrow based on their detailed assessment.
This assessment involves reviewing a number of areas including your income, spending habits, credit report, and other factors. This is done for the lender to understand what mortgage you are able to afford and your credibility as a borrower. The decision in principle can then be used as a supporting document when buying a new property to enhance your offer and give you an estimated budget to aid your property search.
Problems With Getting More Than One Decision in Principle
The main issue with getting more than one decision in principle is the negative impact on your credit score. Some lenders perform a hard credit check when they provide a decision in principle. It is recommended that you get no more than two hard credit searches within a 12 month period, otherwise, it can cause a problem to your credit score.
A hard credit search is usually performed by companies when you’re looking for credit. This can be for a number of things from personal loans to credit cards or even overdrafts. The reason why having a lot of these hard credit searches can impact your credit score is because from a lender’s perspective, if you’re applying for a lot of credit in a short space of time, that can mean you’re in financial trouble.
To help combat this issue, if you are looking to get more than one decision in principle, make sure the lender only runs a soft credit search. Soft credit searches are only visible to you on your credit report and don’t impact your credit score, and are effectively invisible to third parties.
Do You Need A Decision in Principle To Buy A Property?
No, you don’t need a decision in principle to buy a house or property. These are usually used by homebuyers to help them gauge what their budget should be when looking for a property and also by people selling their property to understand the credibility of the buyer.
This is why having a decision in principle can improve your chances of your offer being accepted as a decision in principle shows that a lender is willing to offer you the money. This means there’s a lower chance of problems upon completion and potentially falling through.
Sometimes a decision in principle is required to make an offer on a property. This is quite rare however I’ve personally had to do this when going through a “best and final offer” process. I’ve written a full post about whether you need a mortgage in principle to make an offer or to even view a property that you may find useful.
When Is It A Good Idea to Get More Than One Decision in Principle?
- When your circumstances materially change. This is the main time when you need to get a new mortgage in principle. For example, if you get a promotion at work and your income rises, you’ll more than likely be offered more money with your decision in principle so you can use that to look for a property that’s worth more money. This also works the other way, for example if you move to part time and your income drops or you have a string of missed debt payments, it may make sense to get another decision in principle to check your current affordability. What you want to avoid is falling in love with your dream home, only to find out no lender will let you borrow the money so you can’t put in an offer and lose out on getting the property.
- The current decision in principle is over 3 months old and one is required to submit an offer on a property. When buying a property most of the time you don’t need a decision in principle, however it can enhance your offer as will give the seller reassurance that you’re able to secure the money needed. There are also some sellers or estate agents that require a decision in pricniple, unless you’re buying in cash. This is usually when demand is very high and it’s an easy way for property agents to validate offers (some may say lazy, but I could be bitter!).
- Give you more mortgage options. There are quite a lot of different mortgages available, including repayment, fixed, tracker, professional, the list goes on. Knowing whether you’re eligibile for a specific type of mortgage could increase your budget.
How Long Does A Decision in Principle Last?
Typically a decision in principle will last between 60 and 90 days, however can be up to 6 months depending on the lender.
Does a Decision in Principle Guarantee a Mortgage?
No, a decision in principle doesn’t guarantee a mortgage. This is why getting them multiple times from different lenders can be a waste of time and really you should only be getting more than one if your circumstances materially change or your current decision in principle is about to expire and you need one to put an offer in on a property.
Do I Need a Mortgage Advisor to Get a Decision in Principle?
No, you don’t need a mortgage advisor to get a decision in principle, a lot of lenders allow you to submit your details in an online form or go in person to submit your application. Where a mortgage advisor can help is if you have any specific questions or may benefit from someone running through all of your options and giving you advice on what is best for you.
What to Ask a Mortgage Advisor?
If you do have any questions, definitely go and speak to a mortgage advisor. This post is just intended for general information only although a mortgage advisor will be able to give you tailored advice specific to your circumstances. If you are thinking of speaking to a mortgage advisor, this post I’ve written about what to ask a mortgage advisor may be useful.
Overall, yes you can get more than one decision in principle, and as long as you know how to avoid the pitfall of getting multiple hard credit searches on your credit report then you should be fine.
Without knowing this pitfall of making sure the lender only performs a soft credit search, you could end up in a vicious cycle of continuously reducing your credit score, possibly even without being aware. This could then lead to either being rejected for a decision in principle, or even being rejected for a mortgage on the time comes to actually buy the property.
Hi, I’m John. I’ve always had a keen interest in Finance, so much so that I’ve made a career out of it! This site is a place where I can share everything I’ve learned as well as give me the excuse to research certain topics.
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