If you are currently looking into purchasing a new home, you will no doubt be aware of the term DIP or AIP. But what exactly are they?
Well, they are one and the same thing they are abbreviated from Decision in Principle (DIP) or Approval in Principle (AIP) and it will be one of the first questions asked of you by most estate agents. So what exactly do they do? When you are looking to buy a house, the estate agent has a responsibility to the seller to check whether you are able to proceed with the purchase. If you are buying with a mortgage, this is usually done by you producing a DIP/AIP from a mortgage provider and providing proof of funds for the remaining balance.
On receipt of these, the estate agent will then take the property off the market and you can press on with buying your new dream home! We would generally recommend meeting with a mortgage broker at the earliest possible opportunity. They can determine how much you can borrow so that you know what price range you can consider, source the best mortgage product for you and then submit a DIP/AIP to that lender. The DIP/AIP is a reduced version of a full mortgage application and involves a bank/building society credit checking you to see whether you are credit worthy and able to afford the mortgage (sometimes called credit scoring).
Although it is as it says and is “in Principle” it is a pretty strong indication that you will be able to obtain a mortgage for that amount and is a key element of the overall mortgage process. One note of caution multiple credit searches can affect your credit score so we would generally recommend you only proceed to a DIP/AIP when you know you are definitely looking to buy. Again, seeking appropriate advice will ensure that you are advised when is the best time is to apply. Finding the best solution for your circumstances needs an experienced eye to ensure that you find the right balance between interest rate, fees, term and type of product and penalties. Local, face to face, independent mortgage advice can smooth the whole process and we would be delighted to help.
Paul Hardingham and Tony Ibson are Mortgage and Protection Advisers at Innovate Mortgages and Loans. Both have over 20 years of experience advising individuals and businesses across the North East of England. They can be contacted for bespoke advice at paul@innovateml.co.uk or tony@innovateml.co.uk or call 0191 223 3514.
