mortgage decision in principle

Only 3.5% of people using online mortgage pre-qualification tools (Mortgage Decision in Principle) finally get the mortgage that was agreed during pre-qualification when it comes to fully applying for a mortgage…

There’s little doubt that calculating mortgage affordability and getting your mortgage decision in principle can be confusing. But when you’re looking to buy your dream home it’s important to know how much you can afford to borrow and how much the banks will agree to lend you.

The Problem with a Mortgage Decision in Principle

According to research data from Experian, providers of the “UK’s most trusted Credit Score free for ever”, a staggering 33% of mortgages get rejected by mortgage lenders, because they don’t meet lending criteria.

The research also showed that just 22% of mortgage customers, using a decision in principle comparison website, met the initial qualifying criteria for every lender on the market.

Worse still, when finally applying for a previously agreed pre-qualified mortgage only 3.5% are successful in getting their chosen loan, after the lender completed an eligibility check…

So, the problem appears to be getting the right decision in principle. It’s easy to get a decision online. But sadly, 96.5% of the time it ends up in failure to pass the lenders final mortgage checks when fully applying.

How to improve your mortgage decision pass success

Perhaps the best way to avoid potential disappointment is to get the help of a professional, such as a mortgage broker, before getting a decision in principle.

Understanding mortgage lender criteria has become a bit of a science, it’s not straight forward. Different mortgage lenders have different rules.

Furthermore, lenders look at your income in different ways. What’s acceptable income to some lenders is un-acceptable income to others. Similarly, differences between lenders even apply to the type of property you’re looking to buy, or length of mortgage, and the list doesn’t end there.

Employed Affordability

Things become complicated if your income from employment has extra amounts above your basic salary. For example:

  • Overtime
  • Shift Allowance
  • Bonus Payments
  • Commission
  • Second Jobs
  • Car Allowances 

Additional incomes such as these can complicate affordability calculations.

Mortgage lenders have different rules about what income can be accepted and what can’t. They even have different rules about how much of your extra income can be used, if any.

These differences between lenders, and other criteria rules, can impact on the chances of you getting the mortgage you want.

Self Employed, Contractors, Small Business Owners, Partnerships etc

Assessing mortgage affordability becomes even more prone to failure if you’re not in permanent employment.

You’ve probably seen the comment ‘self-employed mortgage’. Truth is there’s no special mortgage deal for self-employed people.

If you’re self-employed, you should have the same choice of mortgage scheme as a salaried applicant. However, depending on your personal circumstances there’s a chance you’ll be offered a limited range of deals. Believe it or not, you might even face more stringent mortgage affordability checks.

How your total income is put together by your accountant or book-keeper might suit some mortgage providers, but not suit others.

We could probably write a book on how income for the “self-employed” might be assessed when applying for a mortgage. But it’s unlikely we need to tell you how tricky it can be.

The Solution

All said and done, the advantage of getting a decision in principle is clear, as you’ll see below. But in the long run, pre-approval is only going to help if you’ve been pre-qualified for a mortgage that ultimately, you’ll be sure to get.

A decision in principle is no good to anyone, if you only find that on full application you’re rejected, simply because criteria or affordability has been failed…

Before reaching out for a decision in principle on your mortgage, our recommendation is to speak with a mortgage adviser. Amongst other things, discuss openly the composition of your income. Perhaps supply copies of your income evidence, such as payslips, P60s, accounts, contracts etc to the adviser. But, don’t send your private documents across the internet to any adviser without using a secure document upload portal.

An adviser should be able to assess your income accurately, having received supporting documents. There’s a good chance that your mortgage adviser will get you qualified for the amount you’re looking to get.

Here’s some things to think about

When asking a mortgage adviser to help assess your income and get a decision in principle:

  • Does the adviser charge a fee at any time, if so how much?
  • Does the adviser offer access to a full range of mortgage providers?
  • Is there a secure document exchange facility, such as an upload portal?
  • Will pre-qualification need a credit check, and if yes, will it leave a footprint?
  • Can your adviser let you have a selection of affordability results?

By getting a meaningful decision in principle you’ll be confident that, when you start looking at properties:

  • Estate agents and sellers can see you’re eligible for a mortgage
  • You might be ahead of others who haven’t pre-qualified

Being pre-qualified should give your offers weight when it comes to negotiating with sellers, improving your chances of getting the house that you want.



Massey Divall Financial Services are an appointed representative of The Right Mortgage Limited which is authorised and regulated by the Financial Conduct Authority.

The Financial Conduct Authority does not regulate most buy to let mortgages.

The guidance and /or advice contained within this website is subject to UK regulatory regime and is therefore targeted at consumers based in the UK

Conveyancing isn’t regulated by the Financial Conduct Authority.

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