### What does the prequalification process evaluate? - [x] The borrower's capacity for repaying a mortgage - [ ] The fair market value of the property - [ ] The borrower's personal preferences for house design - [ ] The lender's available funding > **Explanation:** Prequalification evaluates the borrower's ability to repay a mortgage, based on documentation like pay stubs, bank statements, and tax returns. ### What is one document a borrower usually receives after being prequalified? - [ ] A finalized mortgage contract - [ ] A deed to a property - [x] A prequalification letter - [ ] A property appraisal report > **Explanation:** After being prequalified, the borrower usually receives a prequalification letter, which they can show to their real estate agent to indicate their budget. ### What kind of documents might be required during the prequalification process? - [x] Pay stubs and bank statements - [ ] Property title and deed - [ ] Building permits - [ ] Zoning laws > **Explanation:** Documents such as pay stubs, bank statements, and income tax returns help the lender evaluate the borrower's ability to repay a mortgage. ### What is the purpose of a prequalification letter? - [ ] To finalize the mortgage agreement - [x] To show real estate agents the borrower's budget - [ ] To guarantee the house purchase - [ ] To determine property taxes > **Explanation:** The prequalification letter informs real estate agents of the borrower's budget, helping them find suitable properties. ### Is the prequalification process a final approval for a mortgage? - [ ] Yes, it includes final approval. - [x] No, it is a preliminary assessment. - [ ] It guarantees loan funding. - [ ] It bypasses all other financial reviews. > **Explanation:** The prequalification process is preliminary, and more detailed financial assessments are made when a sales contract is submitted. ### What does prequalification confirm to the borrower? - [ ] The property conditions - [ ] The neighborhood amenities - [x] The lender's willingness to finance their home purchase - [ ] The tax advantages of owning a home > **Explanation:** Prequalification confirms that the lender is willing to finance the borrower's home purchase, based on preliminary financial information. ### When might borrowers be asked for more detailed information? - [ ] During the property visit -** [x] When a sales contract is submitted - [ ] After moving in - [ ] When signing the deed > **Explanation:** More detailed financial information might be required when a sales contract is submitted, transitioning from prequalification to more formal loan approval steps. ### Can prequalification impact the types of homes the borrower looks at? - [ ] No, it has no impact. - [x] Yes, it helps identify homes in the right price range. - [ ] Only for luxury properties - [ ] Only for older homes > **Explanation:** The prequalification process helps the real estate agent find homes within the borrower's budget, ensuring they view financially suitable options. ### Which of these is NOT typically evaluated during the prequalification process? - [ ] Income - [ ] Bank statements - [x] Property insurance rates - [ ] Tax returns > **Explanation:** Property insurance rates are not typically part of the prequalification process, which focuses on the borrower's financial documents to assess repayment ability. ### Why is prequalification important for first-time homebuyers? - [ ] It guarantees the lowest interest rates - [ ] It provides free maintenance for a year - [x] It helps them understand their budget - [ ] It includes property inspections > **Explanation:** Prequalification helps first-time homebuyers understand their budget, giving them a clearer picture of what they can afford and guide them in the home buying process.