Buying and moving into a new home is one of life’s great experiences, especially if you’re buying your first home. From getting that pre-approval to the “yes!” response on an offer to closing and moving in, every step is exciting. And while the process is engaging and fun, it’s important to prepare for moving day […]
What are proof of funds when purchasing real estate?
Purchasing a home is one of the most significant financial decisions we will make in our lives. To make sure the process is successful, you may be asked to provide a proof of funds letter or document with your offer.
Providing proof of funds is a normal part of purchasing property. This is handy to have on hand when making an offer on a home, in case the seller asks for it.
Proof of funds shows sellers that a buyer has the funds to make a purchase
When providing a seller with a proof of funds letter and documentation, you are showing them that the funds you have are accessible and you have the legal right to use them. Proof of funds is especially important for the seller and your lender to view so they know you can afford the costs of purchasing a home.
Proof of funds is different from a pre-approval
If you have your pre-approval letter, why do you need proof of funds? Haven’t you already secured the go-ahead?
Proof of funds is different from a pre-approval in that when you are pre-approved, the lender is telling you how much they are willing to lend to you. To close the deal with the seller, they may ask you to provide proof that you have the money necessary to move forward with the purchase of a property. Your real estate agent can help facilitate this conversation with them.
Your bank will help provide you the documents you need
When requesting proof of funds, your bank will often have their own template for the proof of funds letter. Together with your real estate agent, they will also help you understand what documents qualify for POFs, including, but not limited to:
- Bank statements
- Security statements
- Custody statements
Regardless of what documentation is used, it all must include the following:
- Account holder’s name
- Current balance of all available funds
- Notarized signature of a bank official
If you have a pre-approval from one of our loan officers, chances are your finances are squared away for the home purchase. The proof of funds letter is just extra security that can help you win the offer, so it doesn’t hurt to have one in hand.