The difference in one sentence
Pre-qualification is a quick, informal estimate based on numbers you self-report. Pre-approval involves a lender actually verifying your income, assets, and credit, and results in a conditional commitment you can put behind an offer.
Why the distinction actually matters
In a competitive market, a seller comparing offers can usually tell the difference, and a pre-approval letter carries far more weight than a pre-qualification estimate. Sellers have been burned by buyers who were pre-qualified but not actually able to secure financing, so pre-approval signals a level of seriousness that pre-qualification doesn't.
What pre-approval actually requires
Expect to provide pay stubs, tax returns, bank statements, and to authorize a credit check. It takes more upfront effort than pre-qualification, but it's effort spent once, before you're competing for a specific house under time pressure.
When to start this process
Before you start seriously touring homes, not after you've found one you love. Getting pre-approved early means you can move immediately when the right house appears, rather than losing days to a process you could have finished weeks earlier.
Once pre-approved, understanding what protects you in an offer matters just as much; see what contingencies should be in your offer.