Have you been asked to provide proof of funds before purchasing that property you’ve had your eye on?
You’re not alone and this isn’t an unusual request.
Proof of funds is a normal part of purchasing property and is essential paperwork that buyers should have on hand when making an offer. Here’s what you should know:
Demonstrates That A Buyer Has Funds Available
Proof of funds is a letter that is submitted to your lender that demonstrates that you, as the buyer, have the funds available to purchase a property. This documentation is used to show that the funds are liquid and legitimate. Even if you are buying in cash, you will need a proof of funds letter.
Money that is in the form of stocks or mutual funds don’t count as proof of funds as they aren’t easily accessible.
Proof Of Funds Is Different From Pre-Approval
You may be asking yourself, “But I already got pre-approved for a loan. Why do I need proof of funds?” A pre-approval is different from proof of funds in that it shows how much your lender is willing to lend.
When you provide proof of funds, the underwriter will take a closer look at your assets and financial documents. Using this information, they will confirm how much you can realistically afford.
Several Documents Can Be Used As Proof Of Funds
When submitting proof of funds to your lender, several types of documentation can qualify, including bank and security statements. Whatever documents are used, the letter must include:
- Account holder’s name
- Current balance of all available funds
- Notarized signature of a bank official
Banks will have their own template for their proof of funds letter, so you don’t have to worry about providing one.