What is a Mortgage in Principle?

Stepping into the world of home buying can feel like walking into a maze. There are terms and phrases that seem to pop up from every corner, making the journey feel daunting.

One term you’ll likely encounter is “Mortgage in Principle”. But what exactly is it, and why is it important in your home buying adventure?


Understanding Mortgage in Principle

A Mortgage in Principle (MIP), also known as an Agreement in Principle (AIP) or a Decision in Principle (DIP), is a lender’s initial indication of how much money they might be willing to lend you.

It’s based on a preliminary evaluation of your financial situation. This is not a formal loan offer, but more of an assurance that the lender considers you a potential borrower.

Having a Mortgage in Principle is like having a golden ticket in the competitive world of house hunting. It shows sellers and estate agents that you’re not just window shopping – you’re ready to buy.

This pre-approval can set you apart from other potential buyers and can give you an edge in a competitive market.


Plot 57 at Chitts Hill, The Appleton

How to Get a Mortgage in Principle

Securing an MIP involves providing the lender with some basic financial information. This typically includes your income, outgoings, and debts.

The lender will then conduct a preliminary assessment to determine how much they would be comfortable lending to you.

Documents You’ll Need

To streamline the process, have the following documents ready:

  • Identification proof (such as a passport or driving license)
  • Address proof (like a utility bill or bank statement)
  • Evidence of income (like payslips or tax returns)
  • Bank statements (to provide a snapshot of your financial behaviour)


Limits and Expiry

An MIP typically has a shelf life, usually lasting between 60 to 90 days. If you haven’t found a property within that timeframe, you might need to reapply.

It’s also crucial to note that just because you have an MIP for a certain amount, it doesn’t mean you should stretch your finances to the limit. Always consider what you can comfortably afford.

The River Reach Development in Mistley

Does a Mortgage in Principle Affect Your Credit Score?

A common concern is whether obtaining an MIP affects your credit score. This depends on the lender – some perform a ‘soft search’, which won’t impact your score, while others might conduct a ‘hard search’, which could.

It’s always best to clarify with the lender about the type of credit check they’ll perform.

MIP vs. Formal Mortgage Offer

It’s crucial to distinguish between a Mortgage in Principle and a formal mortgage offer. An MIP is just the beginning. After you find a property and your offer is accepted, you’ll enter a more detailed process with the lender.

They’ll scrutinise your financial situation more closely and conduct a property valuation before issuing a formal mortgage offer.

Couple walking arm in arm - Hopkins Homes

Final Notes

A Mortgage in Principle is your stepping stone into the world of home ownership. It provides a realistic view of your borrowing capacity and positions you as a serious buyer in the eyes of sellers.

But it’s just the beginning. As you embark on this exciting journey, keep in mind the various stages of buying a home and plan accordingly.

With the right preparation and understanding, you can navigate this path with confidence and ease.

Looking for your perfect new home? Hopkins Homes is a great place to start. Take a look at our new home developments to find one that’s right for you.

If you have any questions or would like to learn more about one of our new build homes, get in touch.