A loan prequalification is an estimate of your borrowing power that is based on information you provide verbally to the lender.
A pre-approval is a preliminary approval issued by a lender after your income, asset and credit have been verified and deemed satisfactory for a given loan scenario. Typically a pre-approval is subject to receipt and review of a fully executed purchase and sale agreement, an appraisal for the property to be purchased and updated income, asset and credit documentation.
In many markets obtaining a pre-approval letter from a lender shows you are serious about purchasing a property. In situations where more than one potential buyers submits an offer, buyers whose offer is accompanied by a pre-approval letter is deemed stronger than offers with a pre-qualification letter.
Points are interest paid up front to obtain a lower interest rate. One point equals one percent of the loan amount.
You should consult with your lender to assess whether paying points to secure a lower rate or paying a larger down payment makes sense in the overall financial picture.
Whether points are deductible varies. If you are purchasing a home, the points are tax deductible. In contract, when you refinance, the points must be spread out for tax purposes. It is recommended that you consult your tax advisor