One of the best things you can do to prepare if you’re in the market to buy (aside from hiring a Nothnagle agent!) is to get pre-approved for a mortgage. Pre-approval has far more significance than a pre-qualification.
Nearly anyone can get a pre-qualification letter; the applicant fills out an application and provides basic financial information. At this point in the process, there is no verification of income, debt and credit rating. A lender will issue a “pre-qualification” letter which basically states that based on the information provided, the buyer qualifies for up to $X amount for a mortgage.
A pre-approval letter is only issued after the lender has run a credit report and verified your financial status. The next step after being pre-approved would be to finalize the mortgage commitment. If you are in a competitive situation on a house and one buyer only has a pre-qualification letter but you have a pre-approval, the seller is more likely to accept your offer because they can be assured that it is very likely you will be able to get financing and go through with the purchase of their home.
A pre-approval letter may provide you with some conditions that must be met in order to obtain a mortgage. One common example would be if you own a home now, your lender may condition a mortgage approval on you selling your home first before they will lend you money for your new home. Another example would be a condition that you have to pay off a credit card or student loan.