What is Proof of Funds When Buying A Home?

When making an offer, if you have plans to get the money, that is not considered proof of funds. If you are suing someone and expect to win a large sum of money, that is not proof of funds.  If you will inherit money when a relative passes away, that is not proof of funds.

 Many buyers consider themselves to be a cash buyer but they actually are not. These are buyers who are:

  • In the process of selling stocks or mutual funds
  • Holding a certificate of deposit that has not yet matured
  • Borrowing money from a relative
  • Selling or Refinancing a personal residence to raise the cash
  • Waiting for a probate court to distribute assets (some would say that this is not proof of funds because the cash is not in hand)
  • Borrowing against securities
  • Liquidating funds from a retirement account

Basically, if the money is not liquid and readily available, then the buyer is not a cash buyer. Sometimes buyers who are obtaining hard-money loans present offers as cash when they are not cash. That kind of behavior is considered deceptive at a minimum and possibly violates contract law.

When a cash offer is made, sellers will probably request proof of funds.  The buyer will need to produce a document to show that they have the cash. The document can sometimes be verified by a loan officer, but more often than not, the seller and the seller’s agent will want to see the actual document. Here are a few examples of proof of funds documentation:

  • Original bank statement
  • Online banking statement
  • An open equity line of credit – letter from bank stating that the buyer has access to this money
  • Copy of money market account balance
  • Certified financial statement
  • Letter from banker stating that you have the specific amount of cash to purchase the property

If you have questions about real estate, please contact Rolanda Pullen Daniel, a Realtor with Coldwell Banker Pryor Realty.  I would love to help!  423-894-6762