A pre-approval gives you an accurate indication of the loan amount you qualify for. A pre-approval is based on validation through documentation, property value and stated loan terms including the type of loan, interest rate and program. Getting pre-approved involves completing some paperwork, takes a few days longer to get and carries more weight than pre-qualification.
Pre-Approval is for the more serious shopper who may be working with a real estate agent in search of a home. Most agents require a pre-approval letter from your loan officer before showing you homes. It assures sellers you are serious and can qualify to purchase their home. It gives your real estate agent more bargaining power when more than one offer is submitted on a home you put an offer on. It's a form of security for both you and the seller.
Your documentation including your current income, credit and total debt-ratio status is given to an underwriter and submitted through automated approval engines. Once an approval answer is received from either of these engines the borrower is approved subject to your employment and credit status during the application process, and also subject to a satisfactory property appraisal and title report. Any misrepresentation in the loan application or adverse change in financial position may void a pre-approval.