A pre-qualification is normally issued by a loan officer, who, after interviewing you and looking over your paperwork, determines the dollar value of the loan you can be approved for. However, just because your pre-qualified does not mean you have the loan. Remember, loan officers do not make the final approval, so pre-qualification is not a commitment to lend. Once the loan officers determines your pre-qualification level he/she will issue you a pre-qualification letter to be used when making an offer on a property.
Pre-approval is a step above pre-qualification. Pre-approval involves verifying your credit, down payment, employment history, etc. Once that has been completed your loan application is submitted to an underwriter and a decision is made regarding your loan application. If your loan is pre-approved, you are then issued a pre-approval certificate which you can take with you when putting an offer on a property. Home owners see pre-approval letters as having cash in the bank, giving you the ability to negotiate a better deal.