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Most people agree that offering to purchase a house with cash is a favorable negotiating tool. Since there's no waiting or uncertainty from a loan approval, the cash buyer needs only to have a Realtor or attorney draw up the paperwork, get an appraisal on the house, and go to closing. In effect, a cash buyer gives the seller assurance that the deal will go through, so the seller is much more likely to participate in the give-and-take of contract negotiations.
 Getting pre-approved for a mortgage loan, allows you to shop as a cash buyer. A complete pre-approval lets everyone know that you are a serious buyer, especially when you submit a written approval letter with any offers you make on a house.
By getting pre-approved, you have made a formal application to the mortgage lender that will be handling your loan. Lenders have varying levels of formality when it comes to this process. Some will take your loan application and offer a non-binding opinion. Some are much more complete and your request will be completely underwritten and approved. In this case, only an appraisal and title work are needed to close the loan. Other companies give authority to their loan officers using automated underwriting systems that can approve your loan in just a matter of minutes. The most thorough companies will issue a written commitment or certificate that officially approves you for a certain sales price, loan amount, or monthly payment.
Getting pre-approved is different from getting pre-qualified. Pre-qualification is limited to discussing your income and debts with a lender who then offers ballpark figures about what you can buy or what monthly payments you can afford. This procedure has two drawbacks. The lender may not have checked your credit history and has made no commitment to you in writing. Plus, sellers and real estate agents know that pre-qualification is not a full commitment, so your bargaining power is greatly reduced.
Some helpful questions to ask any lender regarding pre-approval include:
- How does your pre-approval process work?
- How long does it take to get approved?
- Will you provide a written commitment upon approval of my loan?
- Will it be a full approval or a conditional approval?
- What documentation do you need from me to approve my loan?
- How long will it take to close on the loan after I find a property?
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