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