Is your realtor asking for proof of funds? What is proof of funds in real estate anyway? A proof of funds letter is a document that proves that a home buyer has enough liquid cash to purchase a home. It’s essential paperwork that all home sellers will want to see, so home buyers shouldn’t feel prepared to make an offer without one.
“Sellers won’t want to take their property off the market without knowing that the buyers are truly able to afford it,” says Linda Walters, a real estate agent at Sage Realty LLC in Wayne, PA. Here’s what buyers need to know about how to get a proof of funds letter, including a free proof of funds letter sample and more.
Who needs a proof of funds letter?
Basically, all buyers need to provide a proof of funds letter. Even if you’re getting a mortgage to finance your home purchase, you’ll still need enough money for a down payment (ideally 20% of the price of the house) and closing costs (an additional 3% to 4% of the home’s price).
While lenders will delve deep into your finances to ensure you have the necessary cash on hand to close the deal, home sellers will also want to see that you have these funds set aside. That’s why you provide them with a proof of funds letter, as well as your pre-approval letter from your lenders confirming that they’re willing to loan you the rest of the money you need.
Home buyers who don’t need a mortgage because they’re buying the house in all cash aren’t off the hook, either! They will also need to provide a proof of funds for a cash offer—for a much larger amount, of course.
To learn more about the proof of funds letter and the home buying process, visit the SCOOP! Blog
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