Getting a pre-approval means that the lender has verified your income, assets, debt and credit. The pre-approval is much more accurate than a pre-qualification when it comes to what you can afford.

Preapproval will determine the maximum you can spend on a house before you shop, so you know what price range to target. Many shoppers aim too high, bidding on a home that they later learn is beyond their means because of unforeseen debts or other financial factors. Preapproved buyers can rush the closing if the seller is in a hurry to deal plus gives buyers bargaining power.

A loan Pre-approval is generally more in depth than a loan Pre-Qualification. A Pre-Qual is a mere chat with a loan officer, whereas the loan Pre-approval process involves a more thorough investigation of the borrower's buying power. The Pre-approval process takes longer and involves actual documentations of the borrower's credit history, income and employment, bank statements, and other pertinent financial information.

People interested in buying a house can often approach a lender, who will check their credit and verify their income, and then can guarantee they would be able to get a loan up to a certain amount. The people can then take a letter of pre approval from the lender, and when shopping for a home can have possibly an advantage over others because they can show the seller that they are guaranteed to be able to buy the house.

A Pre-Approval is by far superior to merely being Pre-Qualified. Pre-qualifying is only an opinion based on unsubstantiated information provided by the borrower to the loan originator. A Pre-approval is more indepth and detailed. Normally a credit report is pulled and records of bank accounts and income, as well as W-2's are collected.

Pre-Approval
Signed or Unsigned 1003 (1003 is your Mortgage Application that you signed or the loan consultant asked you the verifiable question on the Application)
Tri-Merge Report
Financial Documents that you sent to the Loan Consultant

Once all documents are received the Loan Consultant will fax all information over to the Bank of your/his/her choice and the Underwriter of the Bank will do a quick review of the documentation received and than determine how much you will qualify for and at what interest rates you will obtain. They will than fax over a Pre-Approval with the banks name on header stating that you have been Pre-Approved from such amount and such interest rate based on the information provided. At that time as well they will also send the loan consultant a list of additional documentation for him/her to retrieve to begin the loan process. This is usually good for 30 days since rates vary monthly.

Today many lenders offer an automated pre-approval or loan commitment online through authorized brokers. This speeds up the process by allowing their computer system to analyze the borrowers credit and income details before a human underwriter actually looks at the paperwork. This method also allows loan officers to get pre-approval from a lender within 24 hours of the borrower applying for a mortgage loan.