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Home loan expert warns of pre-qualification pitfalls, urges buyers to seek true pre-approval


Veronica Millman, Credit Assessor Lead at Timely Home, has cautioned home loan applicants about the crucial difference between pre-qualification and pre-approval, as many lenders use these terms interchangeably, leading to confusion and potential disappointment.

“A lot of lenders put pre-approval when they’re referring to pre-qualification so a lot of language within the industry, such as conditional approval, pre-approval and quick qualification are all bucketed into the same,” Ms Millman said.

Pre-qualification, she explained, merely indicates that an applicant meets the lender’s basic requirements at a specific moment, providing a rough estimate of the loan size they can afford. However, it does not guarantee home loan approval.

In contrast, pre-approval involves a comprehensive assessment, with the lender verifying income, assets, liabilities, serviceability, and credit score. If successful, the applicant receives a letter of pre-approval, committing to financing up to a certain loan amount, subject to final property approval.

Ms Millman emphasised the importance of this distinction, stating, “Pre-approval means lenders have already done all the work to 100% validate everything the customer has told them. It’s not just based on what the customer is saying because sometimes, that is incorrect, or they might assume things are okay when they are not. This helps avoid potential issues by narrowing down factors that could go wrong.”

She warned that pre-qualification given under the guise of pre-approval could lead to overconfidence or mistrust, making it harder for buyers to secure a property in a competitive market.

“The consumer isn’t getting the full picture of the work being done, either way,” Ms Millman added.


One of the main red flags when seeking pre-approval is if the lender hasn’t requested evidence of the applicant’s financial situation, such as a credit check or proof of income and debts.

“It’s better if they’re checking your credit history and confirming your true financial situation,” Ms Millman said, adding that if an offer sounds too good to be true, it likely is.

In today’s housing market, genuine pre-approval gives buyers a competitive edge, as agents prefer dealing with serious, prepared applicants who are less likely to encounter issues during settlement.

Ms Millman concluded, “The biggest benefit to having timely home pre-approval in today’s housing market is it can reduce your time to full approval and settlement period. Much of the groundwork has already been completed, including verifying your financials. This can be advantageous for you, and appeal to real estate agents, as it means they receive their commissions more quickly.”

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