What’s a Proof of Funds letter?

Have you been asked to provide Proof of Funds but aren’t sure what funds qualify or where to get a Proof of Funds letter? To guide first-time homebuyers through the ins and outs of POFs, we’ve compiled a list of some of the most frequently asked questions we’ve received.

Proof of Funds is a letter or document that shows your ability to pay for a transaction. In real estate, think of it as a way to demonstrate that you have the money to buy a home when making an offer. The seller may request a Proof of Funds letter when you make an offer on a home. This is different from the Proof of Funds required by your lender when you apply for a loan.

• Guild will request bank statements to verify that you have enough cash or assets to cover your down payment and closing costs as part of the pre-approval process. As a borrower, you must also show that you have legal access to the funds.
• Sellers may require Proof of Funds in addition to a pre-approval letter before accepting your offer. These documents make your offer more attractive because they assure a seller that you can afford their home. Have your pre-approval and Proof of Funds letters available before you’re ready to make an offer, and you’ll be better prepared to respond quickly to close the deal.

As part of the loan pre-approval process, you’ll be asked to provide documentation. Your documentation is sent to processing, which allows Guild to provide you with a maximum loan amount. You’ll receive pre-approval in the form of a written and signed letter. With this, you can confidently start shopping for your home.

Because the funds you use for the down payment and closing costs must be easy to access, acceptable sources of funds should be either cash in the bank or what are known as liquid assets. Liquid assets are cash equivalents that can readily be turned to cash, such as stocks, U.S. treasuries and bonds, and money-market funds.

If a letter is required, it will commonly include:

• Bank’s name and address
• Account holder’s name
• Balance of funds available in savings and checking accounts
• Copy of an online bank statement
• Authorized bank employee signature

It’s best to wait until right before you’re going to make an offer to request a Proof of Funds letter. Talk to your bank or credit union to find out how long the process takes so you’ll know what to expect.

However, don’t wait until you’re ready to buy a home to get pre-approved for a mortgage. The earlier you begin the process, the better. Pre-approval gives you direction on what homes you may be able to afford, as well as how much you should save for a down payment. A pre-approval letter is highly recommended in a seller’s market because it can make your offer stand out. It also makes negotiations easier because it shows a seller that you’re a serious buyer. From pre-approval to closing, Guild Mortgage advisors are here to guide you through your homebuying journey. Connect with us today.