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Real Estate Proof Of Funds

What Is A Proof Of Funds Letter?

Proof of Funds is a document that demonstrates how much money you have available for your real estate transaction. When purchasing a home, you may need Proof of Funds to show the seller that you can cover the purchase costs of a home.

Proof Of Funds are similar to a Pre-Approval letter from a Lender, but serves the purpose of confirming the amount of liquid cash to cover the following situations:

  • All Cash Purchases
  • Down Payment Confirmation
  • Additional Upgrades for New Construction
  • Option Money Payments
  • and other unique circumstances

What Qualifies as Proof Of Funds?

Official statements from recognized banking or financial institutions carry the most weight with Sellers when asking for a Proof of Funds.

  • Official Bank Statements (most common)
  • Certified Financial Statement
  • Account Balance Letter
  • Account Balance Screen Capture (least trusted)

In some transactions, simply having a bank statement from your bank or printed online can qualify. Additionally, a certified financial statement or copy of a money market account balance will qualify. Other times, you will need a letter from your bank or financial institution that states the exact amount of accessible or liquid funds that you have available. Bank statements are the most common document to use as POF and can typically be found online or at a bank branch.

What are liquid funds? 

It’s important to note that your funds must be liquid. Liquid funds refers to the amount of cash that you can withdraw or access on short notice or through a simple process. This means that mutual funds, life insurance, another person’s bank account, shares and bonds, or proof of other possessions do not qualify as Proof of Funds.

How Is A Proof Funds Letters Different From A Preapproval Letter?

A preapproval letter is a document stating that a lender will provide a buyer with a loan, whereas Proof Of Funds letter states that a buyer has funds available to pay for costs associated with the purchase of a home beyond the loan amount.

Why Do Sellers Ask For Proof Of Funds?

Sellers may ask for a Proof Of Funds in the following situations:

  • Showing Request
  • Offer To Consider
  • Contingecy Removal

Sellers will ask for Proof Of Funds in addition to a preapproval when they want to see evidence that a buyer can cover the closing costs and down payment. They may also require Proof Of Funds even if a bank or lender does not require it to approve you for a mortgage.

We’ve found the following seller priorities shape their needs and desires for a Pre-Approval and Proof Of Funds:

It takes time and effort to schedule, prepare, and leave a home vacant for a buyer to explore. Sellers want to be sure it’s worth their time to make their home available for touring.

Sellers want to be sure buyers can actually afford the property before taking the next steps to schedule tours or consider offers.

Time is money and sellers want to feel confident buyers will perform as agreed. Getting something in writing from a trusted thrid party goes a long way to create confidence and certainty.

Life is busy. Making time to clean, stage, and open a home for public tours can be exhausting. Sellers want their efforts to end with positive results.

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