Preapproval is a formal application and a lender’s guarantee to loan you a certain amount of money. It is based on you providing the same financial records as you would if you had already selected a home to purchase. The preapproval shows you and the sellers the amount that a lending institution has promised to lend you.
Remember that a mortgage is not only based on your approval; it is also based on the appraised value of the real estate that will secure the mortgage. While you may be preapproved for a certain amount, in order to actually get the mortgage, the home also must be approved.