A Mortgage in Principle (MIP) shows how much lenders will lend you before you find a property. For first-time buyers, it's one of your most useful tools when house-hunting.
Estate agents take you seriously with a MIP, you'll know your actual budget, and it speeds up the process by confirming your affordability upfront.
You should get your MIP before going house-hunting - the process takes about 10 minutes to complete, it usually doesn't affect your credit score, and is valid 60 to 90 days (you can always renew the MIP should it expire).
What is a Mortgage in Principle (MIP)?
The Mortgage in Principle is a written estimate from your lender that details how much they would be willing to lend you.
Sometimes referred to as an Agreement or Decision in Principle (AIP or DIP), the Mortgage in Principle is not a mortgage offer. It should be seen as an indication of how much they might be willing to lend you.
The Mortgage in Principle document lays out the maximum amount you might be able to borrow, the estimated repayments involved and the period for which the MIP is valid, which is typically between 60 days and 90 days. If it expires, you can always reapply.
The key distinction between a Mortgage in Principle and a full mortgage offer is that the MIP is only an indication based on a soft credit check, while the mortgage offer is a formal approval, involving a detailed credit check and a property survey to establish the value of the property you want to buy.
Why you need a Mortgage in Principle (MIP) as a first-time buyer
There are four key reasons for you, as a first-time buyer, to organise a Mortgage in Principle:
It shows you're serious
Estate agents prioritise buyers with a MIP, and some won't arrange viewings without one.
It reveals your true budget
A MIP is more accurate than online calculators because it's based on your actual circumstances. You'll avoid wasting time viewing properties you can't afford.
It speeds up making offers
Sellers prefer first-time buyers with a MIP because you have no chain and can move quickly.
You have the advantage with no chain
No chain plus a MIP makes you an attractive buyer who can negotiate from strength.
When should first-time buyers get a Mortgage in Principle?
You should get a lender involved to provide a MIP before starting the house-hunting in earnest, but avoid doing it too early because you might not be ready, or you don't have the deposit saved up yet, which means that you will likely be turned down.
So, you need to have the deposit saved - or at least you should have the required amount almost there and protected from other spending. You'll also benefit from having a rough idea about the kind of budget you'll be looking at and the area and location in which you want to buy your first home.
Lenders typically look for at least three months in your current job to show employment stability.
Your perfect MIP timing checklist:
- Deposit ready (or nearly saved up)
- Target area and price range established
- Plan to view in next 2-3 months in place
- Stable finances
How to get a Mortgage in Principle: a step-by-step guide
Getting a Mortgage in Principle is a relatively straightforward process, but taking some time to prepare will make it smoother.
Before you apply, you'll need two pieces of information: personal (name, address, employment details and history), and financial (income, outgoings, current debts, and deposit funds).
Step 1: Choose your route
You have three main options: contact a lender directly, work with a mortgage broker, or use online comparison tools. For most first-time buyers, a mortgage broker is the best choice - they can help you understand which type of mortgage suits your situation and find deals you might miss on your own. They have access to the whole market, can find deals you might miss, and their advice is free. Going direct to your bank can be quicker if your finances are straightforward, but you'll only see their products.
Step 2: Complete your application
Provide all your personal and financial information in one go. Answer the affordability questions honestly and declare any credit issues upfront. The application typically takes 10 to 15 minutes.
Step 3: The credit check
Most lenders will perform a "soft" credit check, which won't affect your credit score and only you can see. However, some lenders do a "hard" credit check, which will appear on your credit file and could impact your score. Always ask which type of check the lender does before you apply.
Step 4: Receive your certificate
Most lenders give an instant decision, or within 24 hours at most. Your Mortgage in Principle will be valid for 60 to 90 days. If it expires before you find a property, you can easily renew it without affecting your credit score.
Will a Mortgage in Principle credit check affect my credit score?
In truth, the majority of lenders will carry out a "soft" credit check, which will not impact your credit score, although it is important to recognise that some lenders will perform a "hard" credit check simply to provide you with the MIP.
What are the differences?
A soft credit check won't affect your credit score and only you can see it. This is the type favoured by major UK lenders. What's more, there will be no problem if you request multiple soft credit checks, which means you can shop around with lenders to provide a MIP that best suits your needs.
A hard credit check is performed by some lenders, which means that it appears on your credit file and is therefore visible to other lenders. If you were to request a number of MIPs in a short space of time where a hard credit check is performed, this will act as a red flag of warning to other lenders.
Therefore, you need to protect yourself:
- Ask the lender whether they perform a "soft or hard credit check" before you apply for the MIP
- Avoid applying to multiple lenders in quick succession
- Check your credit score before you apply (this can be done easily via free apps like Experian or ClearScore)
What happens after you get your Mortgage in Principle?
House-hunting with confidence - with your MIP, you can show it to the estate agents, who will treat you as a serious homebuyer. The MIP also provides assurance on what your budget is, allowing you to focus on a more realistic price range and cut out unnecessary viewings for properties outside your budget.
Keeping your finances stable - at the same time, you should avoid activities that will affect your finances or credit rating. Don't change jobs, avoid new credit agreements or loans, and certainly don't spend the deposit you have saved. Your lender will be doing a hard credit check once you formally apply for the mortgage.
When you have found the property you want - share the Mortgage in Principle with the agent or seller, make an offer, instruct your conveyancing solicitor as soon as that offer is accepted, and start your preparations for the formal application for the mortgage. Learn more about what happens after the offer got accepted.
When you apply for the full mortgage - be prepared with the extra documents that your lender will require. Your lender will perform a full credit check and order a property valuation survey to verify the financial risk they would be undertaking. This process takes between two and four weeks in parallel to the legal tasks being carried out by your solicitor. You can also check our full documents checklist for first time buyers.
This important stage is obviously dependent on you finding the property you want to make an offer on, but, assuming your offer is accepted, the timeline from obtaining your Mortgage in Principle to the completion day when you receive the keys is typically between eight and twelve weeks.
Ready to get your Mortgage in Principle?
When it comes to the legal side of things, Homeward Legal will be there to help first-time buyers through their journey to home-ownership. Get a free conveyancing quote or call us on to speak with our team, we'd be happy to help.
Frequently asked questions about Mortgage in Principle
How long does a Mortgage in Principle last?
Most Mortgage in Principles are valid for 60 to 90 days, depending on the lender.
With home-hunting potentially taking longer than the document's duration, you may find your Mortgage in Principle has expired. You can easily and quickly set up another one without impacting your credit score.
Do I need a Mortgage in Principle before making an offer?
Of course, it's not a legal requirement. However, armed with the Mortgage in Principle, you can show you have the finances to complete the purchase.
The Mortgage in Principle will give the agent and the seller the confidence that you are serious about buying the home, and, moreover, are able to afford it.
How much can I borrow with a Mortgage in Principle?
The lender will determine how much they would be willing to lend you, based on the basic financial information you have provided to them when applying for the Mortgage in Principle. This will be verified with a more detailed check when you enter the formal mortgage application process later.
Can first-time buyers get a Mortgage in Principle with bad credit?
It's unlikely that any lender will be prepared to lend you the money you are looking for if you have a bad credit score. The credit check allows them to assess the level of risk they would be running by lending you the money.
If they do decide to take the risk, it might not be the amount you are looking for. It makes sense to work at cleaning up your credit score before you apply for the Mortgage in Principle.
Is the Mortgage in Principle free?
In short, yes it is.
The lender is looking to do business with a good credit risk. If they give you a free Mortgage in Principle, you are more likely to be tied into the mortgage products they provide when you arrange your mortgage.