Prequalifying for a mortgage generally helps you determine how much house you can afford. Most lenders require that your monthly mortgage payment, including principal, interest, taxes and insurance, range between 25 and 28 percent of your monthly gross income. Remember, being prequalified does not necessarily mean that you will be approved for a loan of that amount.
Preapproval from your lender means that you have provided them with the necessary paperwork, and they have approved your actual loan amount. Having preapproval for a home loan will put you in a much better negotiating position, because the seller knows that you are able to obtain your loan to purchase their home.