Pre-qualifying for a mortgage generally helps you determine how much house you can afford. It’s a good way to know what price range you should be looking in. In general the term means that someone has taken a look at your income and expenses and plugged them in to a debt-to-income ratio formula. Loan pre-qualification does not typically include an analysis of your credit report or an in-depth look at your ability to buy a home and does not necessarily mean that you will be approved for a loan of that amount.
Pre-approval means that a lender has reviewed your credit history, verified your assets and employment, and has approved your loan before you have found a home to purchase. Getting approved also gives you an advantage over other buyers. Your approval makes it easier for you to negotiate on a home, than a person who is not approved. Most seller’s today will require a loan approval letter with any offers