How Do I Show Proof of Funds?

Buying a piece of real estate is a dream for everyone and marks a new chapter in the buyer’s life. There is a preconception that placing an order on a property is the most challenging part of the buying process.

One of the steps in the buying process is proving your rate of affordability. Buyers need to verify that they have the money and can access it to complete the property buying transaction.

So how do you show Proof of Funds?

how do I show proof of funds

1. What is a Proof of Funds Letter?

Proof of Funds (POF) is a document that shows that a person or business possesses the funds to complete a property-buying transaction.

A proof of funds letter can be in the form of a bank, security, or custody statement.

The seller may need more than a proof of funds when more than one financial institution holds the buyer’s funds. The letter does not have to be authorized or drafted by a bank officer. Instead, a bank statement with the details of the subject account will do.

Cash buyers will have to confirm that they have adequate liquid resources to cover closing costs and the total sale price. Below are some of the contents included in a proof of funds letter:

• The account holder
• The date and available balance
• Client’s bank and address
• An official signed bank statement
• A signature of the bank official

2. Is a Proof of Funds Letter Necessary?

A seller might require a letter to guarantee that the money is available and accessible to the buyer. Particularly when purchasing a home, a mortgage company or individual seller will need proof that the money is transferable and is enough to meet the down payment and related costs.

The proof of funds letter refers to liquid capital in most cases, so some investments, such as mutual funds, retirement accounts, and life insurance may not qualify.

3. When Does a Buyer Require Proof of Funds?

Sellers can request proof of funds before the buying process advances to establish how serious a buyer is. Nevertheless, a buyer is only obligated to provide POF after making an offer on the property.

It can be an advantage for cash buyers to provide a letter at an early stage purposely secure a good deal and demonstrate their ability to complete the sale quickly.

However, mortgage seekers are advised not to request mortgages in principle, unless they are serious about making an offer. The reasoning is that mortgages are only valid between two and three months, and each time lenders provide them in principle, they often involve thorough credit checks that can impact a buyer’s credit rating.

4. When is It Not Required?

There are certain situations where a prospective buyer may not require a POF, such as when parties enjoy a trusting working relationship or during property viewing. When a buyer wishes to view the property, usually his mind is not made up whether to buy or not. Therefore, they do not need to prove their affordability.

Once the buyer is satisfied with the property, he can proceed to submit a POF. It may not be required when the transaction is between parties with a history of transacting. A seller can approve the sale, having verified the soundness of the buyer’s financial health from prior transactions.

5. How Can a Buyer Get Their Letter?

Depending on the buyer’s circumstances, proof of funds can originate from various sources.

One can request it from a commercial bank that houses his savings or checking accounts.

The buyer can also request a letter from a friend or relative in case of a gift. The letter will also serve as evidence of the legitimacy of such funds.

In case of an inheritance, a letter from a will executor may be necessary.

Pension records, like bank statements showing deposits from the pension company, may be needed when the buyer relies on his pension to complete the sale. When buyers plan to buy the property using shares, they will need records to prove ownership of such claims, release date, and money receipts.

6. What Types of Proof of Funds are Unacceptable?

Many buyers with no liquid assets often ask themselves, ‘How Do I Show Proof of Funds?’ and wonder what type of proof and funds are required.

Well, there are plenty.

If a buyer’s savings exceed the capital needed, they can supply the seller with a copy of their six-month bank statement. If a buyer recently moved money to the account, they would have to explain the source of those funds. When multiple entities hold the money, one will need to provide more information detailing each entity. Some entities do not accept shares and bonds at their face value because of their volatility. Buyers will need to liquidate these assets in their appropriate banks and then submit statements of account.

Moreover, possessions, such as vehicles, jewelry, precious metals, art, and other valuable items, are unacceptable, but they can first be liquidated and submitted in monetary terms. The same applies to money in the form of properties and cryptocurrency.

7. Is It Like a Pre-Approval letter?

A Pre-Approval letter differs significantly from proof of funds because it only stipulates the amount a client can buy a property, noting his capacity to pay. Accordingly, a Pre-Approval letter only touches on the price range and may not be helpful to the seller. It can also indicate a range of values for buying property. Then, qualifying for a loan does not mean the client has the money to confirm the transaction.

differences of a pre-approval letter


8. Is Proof of Funds the Same as Proof of Deposit?

A Proof of Deposit (POD) is a confirmation letter from a financial institution showing the deposited amount in the client’s account. The source of the money is verifiable. Nevertheless, when clients apply for a mortgage, they need to show proof of funds and confirm the origin; so, although different, both POD and POF go hand in hand.

Generally, buying a real estate property is exciting, but it can be intimidating since it involves extensive paperwork. POF is an essential document because it reduces the hassles, and the buyer guarantees the seller that they are committed. Before proceeding, one should ask, ‘How Do I Show Proof of Funds?’ then consult a credit expert, home inspector, mortgage broker, or real estate agent.

Get Your Proof of Funds Letter Today

So you found a great deal and want to come with a great offer.  Now you can!  Get a proof of funds letter today to show the seller you’re serious about your offer.  With a proof of fund letter you can beat the competition to the punch and put yourself in the best position to get “yes!”

Cogo Capital’s Proof of Funds Letter service creates a downloadable, printable POF letter that shows you’re a serious buyer, with a serious offer.  Don’t wait.  Get your POF letter today!l



Latest Posts

Proof Of Funds Letter

A proof of funds (POF) letter is a document that verifies your financial stability. It’s used in many different scenarios, such as when you’re looking