Hi Saraak! Well, I'm 85lbs down with just a few to go and I can tell you that most of what I have lost is, indeed, fat. I'm at 129.5 right now and my bodyfat % is 23.8 which according to the online charts puts me at fitness level. I do not exercise other than an abdominal routine I do 3 times a week and have only been doing for about 2 months now or so. I don't advocate this, but this is what has worked for me so far. Once I go on maintenance I will have to up my exercise, needless to say. But, as far as saggy skin goes, that's largely determined by a few factors such as age, skin elasticity, how much is lost overall, how long one has been over weight etc. But yeah, you lose the fat, keep the muscle.
Hope that helped and good luck!