The Ministry of Housing would like to encourage buyers to get a decision in principle as early as possible. This sparks a debate as to when in the house buying process someone should actually obtain a decision in principle (DIP).
The conversation really falls on the line of; do you get a DIP before looking at houses? Or do you get one once you have found a house you would like to buy?
Some will argue the former stating it gives you more confidence you can obtain a mortgage following a full mortgage application, or it is a way to manage expectations as you will know what you can borrow from a particular lender. On the converse, it could be seen as a method by lenders or the in house brokers of an estate agent to make the client feel obligated to come back to them.
In addition to this it gives you the view of one particular lender at that time, with the mortgage market generally being quite fluid there is every possibility that that particular lender no longer offers the best overall option for you. That being said doing 2 DIP’s with different lenders is unlikely to damage you credit score and report, however if you end up doing numerous DIP’s it can have a negative impact.
I for one lean towards the argument for getting a DIP after you have found a property you wish to purchase. Yes, go and see a broker before looking round houses, that way based around a combination of your conversations, checking against criteria and affordability calculations you can get a good idea of what you can afford and who you can potentially use as your mortgage lender. This method isn’t concrete and it relies on you being completely open and honest with your broker, but it gives you a good indication whilst safeguarding your credit score and report.
Just like everything there is not a one size fits all approach to this. For some, getting a decision in principle before looking is important, if not imperative. The most obvious reason that springs to mind is if you have had any blips of any kind on your credit file in the past for example, or even if you have had no credit in the past.
Daniel Brown BSc (Hons), Cert SMP
21st May 2018