It sounds like a mortgage broker that is looking for money, but he is doing it in a little bit shady way.
For pre approval you don't need to pay anything, but you do need to pay processing fee at closing of the loan.
This mortgage broker have found two innocent borrowers and he takes adventage of them to make quick buck, don't fall in that trap.
You can good deals out there from banks and the government, he is not the only broker out there that can help you, you can find thousands of agents out there.
Let me give you the source that all real estate agents use to look at properties that are on the market.
Click the link below, its 100% free for you to use.