In one line: A lender's written statement, after checking credit and income, of how much it will lend you.
A pre-approval letter follows a real underwriting look: a credit pull, pay stubs, tax returns and bank statements, and a loan amount the lender states in writing, usually valid for 60 to 90 days. A pre-qualification is the same conversation without the documents, and sellers know the difference.
In the Las Vegas market a listing agent expects the letter with the offer, and a letter from a local lender the agent has closed with before carries more weight than one from a website.
The amount on the letter is a ceiling, not a target. The payment calculator says what that amount costs each month with taxes, insurance and dues in it, which is the number to shop under.
A worked example
A lender reviews two years of returns, two months of statements and a credit report, and writes that it will lend up to $480,000 at today's rate for 90 days. Offers on anything under that price carry the letter; the payment calculator says which of those prices is comfortable monthly.
Questions people ask
How long does a pre-approval last?
Typically 60 to 90 days, after which the lender refreshes the credit pull and documents. Rates on the letter are not locked until you have a contract.
Does a pre-approval hurt my credit?
One hard inquiry, and multiple mortgage inquiries within a short shopping window count as one for scoring purposes. Shopping lenders inside two weeks is free of penalty.