However, getting pre-qualified is not enough. You should be pre-approved for a loan before you start searching for a home. Pre-qualification simply means the lender has run a credit report and reviewed the loan application. Based on these factors, the lender estimates what the buyer would qualify for without verifying all the information given by the borrower. In practice, pre-qualification is only slightly better than not talking to a lender at all.
Many loans fall through even though the borrower has been pre-qualified.
Pre-approval is a different story. Pre-approval means all the information has been verified and the lender has agreed to make the loan subject only to the title report and appraisal of the new property. When you get pre-approved first, the lender will give you a letter stating the loan amount that you are approved. When shown to a seller, the letter makes the seller feel more comfortable and will greatly strengthen your offer and negotiating position. Buyers tend to believe that price is the most important part of the offer.