How does the check work?
We know that financial checks can make people nervous. It helps to know exactly what is happening behind the scenes.
When you apply for a decision in principle, a lender or broker needs to check two main things:
- Affordability: do you earn enough to pay back the loan?
- Creditworthiness: have you managed your debts well in the past?
To do this, they look at your income and your outgoings. They also look at your credit history.
Soft checks vs hard checks
This is the number one thing people worry about. Most lenders use a "soft" credit check for a decision in principle. This means they can see your file, but other lenders can’t. It doesn’t leave a mark that affects your score. You can shop around without damaging your chances.
However, some lenders might do a "hard" check. This leaves a footprint on your file. If you’re using a mortgage broker, they will be able to tell you which type of check a lender uses before you apply.
What you need to apply
You don’t usually need to dig out every single bank statement from the last five years just yet. The initial process is usually quite simple.
To get your decision in principle, you will usually need to provide:
- Address history: where you have lived for the last three years.
- Income details: how much you earn from your job or self-employment.
- Outgoings: regular payments like credit cards, loans or childcare costs.
That is usually enough to get the ball rolling.
Understanding your deposit
Your deposit is the money you put down towards the property purchase. The bigger your deposit, the smaller the mortgage you need.
Before you apply for your decision in principle, you need to know how much cash you have saved up. The amount of your deposit affects the range of mortgages available to you.
