A pre-approval letter shows the seller and his/her real estate agent that you have been pre-approved by a lender. This letter will show them that you have been approved up to a certain maximum amount. It proves you're able to buy a home and establish your maximum home price so you wont have the urge to get carried away with home you may not be able afford or be aprroved for.
Try to look into the programs that will save you money. You don't need to pay the private mortgage insurance or even need to put out a lot of cash at closing time. Some lenders will let you finance closing costs or you can negotiate to have the seller pay them.
If you pay lass than 20% of the cost of the home in the down payment you may be required to pay for the private mortgage insurance. This will increase your mortgage payment by an average of $125 per month.
Try looking into a no closing costs mortgage. Many lenders will be able and willing to absorb the costs of closing and the private mortgage insurance.