Pre-qualifying for a loan vs. pre-approval.
While it's common to apply for a mortgage after you make an offer on a home, starting the loan approval process before you find your dream home is to your advantage. Here's why:

Say you've spent every weekend for the past two months looking at homes and you finally find one. You submit a purchase contract to the seller. You apply for a mortgage. Then you hit a roadblock—your mortgage application is denied. If the seller has other buyers waiting, or needs to sell quickly, chances are the property will be swept out from under you. Two ways to help avoid this scenario are to become pre-qualified or pre-approved for a loan.

Pre-qualifying simply entails speaking with a lender, who—based on asking you some questions about your finances—offers an opinion of the loan amount you are eligible to borrow. The lender doesn't ask for any supporting paperwork to confirm what you say, and can change his or her mind when you come back to apply for a loan. There's no charge for pre-qualification.

Pre-approval is a more complex process, and sometimes involves a fee. The lender will want information about your employment, income and debts to prove that you are a good risk.

A lender's pre-approval letter carries more weight with a seller than a pre-qualification letter. It's proof of your buying power on paper, which can give you an advantage when you're among several buyers pursuing a property.

Pay off other loans.
If at all possible, consider paying off any high-interest loans before applying for a mortgage. The more debts—like car loans or credit card balances—that appear on your mortgage application, the smaller the loan amount the lender will be willing to offer.