Proof of Funds in Real Estate—What You Need to Know

Real estate involves buying buildings or homes in a specific location. One of the documents that real estate investors can provide to show a serious offer is a proof of funds letter. This document shows how much cash an investor possesses.

For cash buyers in real estate who want to show their commitment to purchasing a property, proof of funds for cash offers is crucial.

proof of funds in real estate
A proof of funds letter shows you are serious about an offer

Benefits of Proof of Funds Letter

A Proof of funds letter also shows that the buyer has the liquid assets to invest in the property. The value of the assets should not fluctuate over time. Additionally, the document is fundamental for establishing a good relationship. It shows that the buyer is serious about investing in the property because of enough funds.

The letter must include the name of the buyer to show ownership of the account. Moreover, the letter consists of the current account balance of the investor. That way, the seller can prove the legitimacy of the letter of proof of funds.

For the owner to remove the property from the market, the proof of funds letter is vital. Some investors mislead the seller by giving a word-of-mouth assurance. The investor may end up removing the property from the market based on the investor’s promise. A proof of funds letter eliminates such risks by assuring the seller that the sale will go through.

Alternatively, sellers in real estate might require a down payment. The proof of funds letter may be requested by the seller in such instances. It shows evidence that the buyer has enough money in his account to make the payments.

Essentially, a proof of funds letter includes funds available under credit. One or more proof of funds letters may be needed by the seller. This happens if funds are coming from multiple accounts.

Mortgage Loan

Incidentally, some buyers cannot afford to raise the whole amount needed by sellers. The buyers end up purchasing the land with a mortgage.

In such instances, the buyer and seller agree. Typically, the buyer agrees to pay the amount within a certain period.

When purchasing a property in a mortgage, a proof of funds letter is provided. When applying for a mortgage loan, the borrower’s investments are included as a payment source for the loan.

But, the buyer’s assets are not included in the proof of funds letter.

Alternatives of Proof of Funds

Instead of using a proof of funds letter, investors can use a brokerage account statement or a bank statement.

The bank account statement can be printed online or given by the bank directly. The document serves the same purpose as a proof of funds letter.

The documents used solely depend on what is comfortable for the investor and the real estate seller. Both the documents will show if the investor has enough funds to close the deal.

For privacy reasons, the buyer can choose to conceal sensitive details in the statement. For most people, sensitive information entails a social security number and account number.

How Can I Get a Proof of Funds Letter

The proof of funds letter is given by the bank. The process is straightforward since most banks have ready templates. The templates serve as proof of funds letters. It outlines the balance and the date.

In financial institutions that do not have ready templates, the process may take a few days. For mortgages, the financial institution provides the proof of funds letter.

Notably, the funds included in proof of funds real estate only have liquid funds. Possessions, life insurance, and other people’s bank accounts are essential. However, they cannot be used as proof of funds letters.

A Money Market Account

Apart from bank statements, other funds can also qualify as proof of funds real estate.

A money market account is an account where an individual can make money deposits. It is like a savings account except a higher opening balance is needed to open it. Generally, the account earns higher interest than a savings account.

The investor can use a money market account statement in real estate instead of a proof of funds letter.

The Pre-Approval Letter

Most people confuse proof of funds in real estate and pre-approval letters.

A pre-approval letter is an agreement between the buyer and the lender. Here, the lender agrees to loan money to the buyer.

The proof of funds letter acts as evidence that the investor has enough funds to purchase a property. Further, investors use a pre-approval letter to assure the sellers that they can afford a property.

In real estate, mortgages are standard, especially if the buyer is qualified for a loan. The amount loaned to the buyer is based on their credit score.

The financial institution also requires specific documents like bank statements.

If investors want to acquire real estate property, they are asked to provide a pre-approval document. Additionally, they must provide proof of fund letter.

For those who desire to buy a real estate property, proof of funds in real estate is crucial. The document assures the seller that you have the funds to close the deal.

What Our Clients Say

This is a great group of people to work with. Thanks guys for all your help and support.

Zhamere W.


Latest Posts

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

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