It used to be that your Realtor or sometimes a mortgage officer would run a few numbers, ask a few questions and then tell you that you were 'pre-qualified' for a loan of a certain amount. Over the years, sellers have become more savvy to the pre-qualification process, which in reality relied on unvalidated information supplied by a potential buyer, and are now asking for a 'pre-approval' letter from a certified lender, which requires the lender to order a credit report and to verify other pertinent information provided by buyers. With this information, the lender should be able to determine if a buyer is qualified for a loan, and in most cases should be able to specify the amount of loan for which the buyer is qualified.
The advantage of this process to buyers comes into play when an offer that is less than the asking price is presented to a seller. The first thing most sellers want to know is whether the buyer has been pre-qualified for the loan they are seeking. When the listing agent produces a pre-approval letter, it is far more likely that the seller will look favorably upon the offer than if there is no letter provided.
It takes less than an hour of your time to have a pre-approval letter issued. And it's well worth the effort. Get the letter before you begin to look at homes. It will save you, the Realtor, the listing agent and sellers a lot of time and will save you $$$.