In This Article

  1. What is a Proof of Funds Letter?
  2. What is In a Proof of Funds Letter?
  3. Proof of Funds Letter vs Preapproval Letter: What’s the Difference? 
  4. Proof of Funds Letter Templates
  5. The Bottom Line: Proof of Funds Letter

With so many confusing real estate terms and required documentation, the home buying process can be complicated.

Down payment. Escrow. Title. Agent fees. Closing costs. Proof of funds letter. 

But the process doesn’t have to be stressful. By understanding each of these items, you can ensure that the process goes smoothly. 

Even more importantly, you can also ensure that the deal is done with your best interests in mind.  

One of these items to understand is a proof of funds letter, something that is often a requirement in the real estate process

What is a Proof of Funds Letter?

A proof of funds letter is a document that demonstrates that someone can pay for a specific transaction, such as purchasing a real estate property

These costs include:

For example, if you’re buying a house in cash, or if you are making a downpayment in cash, you’ll need a proof of funds letter. 

Buyers of a property must be prepared to submit a proof of funds letter to a seller; sellers must look for a proof of funds letter to ensure that the person has the finances available to purchase the property. 

Depending on the type of real estate deal, a proof of funds letter can be a bank statement, a financial statement, or in some cases, an account balance. 

What is In a Proof of Funds Letter?

Your proof of funds letter must include certain specific information, including the following: 

  • The name and address of the bank where your money is kept 
  • An official bank statement for your account either printed at the bank branch office or as an online statement
  • The total balance of funds in your checking or savings account
  • A copy of your online banking statement
  • The date that the funds appeared in your account
  • You may need the signature of an authorized bank employee or a notary

Proof of Funds Letter vs Preapproval Letter: What’s the Difference? 

While it’s easy to confuse a proof of funds letter with a preapproval letter, it's important to understand the differences between the two real estate documents. 

A preapproval letter is an estimate; a proof of funds letter is evidence. 

The lender issues a preapproval letter when they estimate how much you can afford to pay for your mortgage according to your credit score

Meanwhile, a proof of funds letter shows evidence that you have the cash on hand to cover the down payment and closing costs. The proof of funds letter also shows where you keep the funds.

Proof of Funds Letter Templates

Here are some links to POF templates:

The Bottom Line: Proof of Funds Letter

Whether you are a buyer or seller, a proof of funds letter is not only wise to utilize; it may be a requirement. 

It’s one of many real estate terms to understand. In doing so, not only can you grow your real estate knowledge. You can ensure that your next deal has your best interests, and is the most advantageous one for you yet.