Yes, there can be downsides to getting pre-approved. For one, mortgage pre-approval may impact your credit score. While the damage can be minimal and short-lived, your credit will be affected if, for instance, you get pre-approval multiple times over a long period. Because you want to apply for a loan with the best possible rate and terms, this is not ideal.
If, however, you make mortgage pre-approval inquiries over a shorter period, it should have considerably less effect on your credit score. The reason for this is that credit scoring models group multiple inquiries in a short time (such as 30 days) into one on your credit report. Therefore, if possible, you should do as much shopping for mortgage pre-approval in as short a time as possible.
After your lender pulls your credit, the report will be used for underwriting, in the event you submit a full mortgage application. Since the credit report is good for 120 days, your lender will not have to pull it again.
Yes, you can get denied after mortgage pre-approval. The reason this can happen is that your home loan must pass through the underwriting process before being finalized. At that point, the lender will thoroughly review your finances to decide if they should approve you for a home loan. Your mortgage lender might deny your application if your financial situation has changed since you got your mortgage pre-approval.
As we have seen, there are risks that come with mortgage pre-approval, such as having an impact on your credit score. Mortgage pre-approval is also not a guarantee that you will ultimately be approved for a mortgage. However, it is often the first necessary step to securing a mortgage—and a home. It is important that you understand what you need in order to get mortgage pre-approval, as well as how to navigate the process, to indicate to lenders that you mean business.