Being pre-approved means the lender has already processed much of the paperwork for the loan (application, credit check, etc.) and has committed (with certain conditions) to lending you up to a specified amount of money for a qualified home purchase. A loan application fee may be required.

Pre-approval is better than pre-qualification, which only gives you an estimate of how much you can borrow, assuming there are no surprises in the credit- and income-checking process. Being pre-approved, however, will give you bargaining power when it comes time to make an offer on a home. You'll know exactly how much home you can purchase, and sellers will view you as a serious buyer -- one who's likely to go to settlement.