What Qualifies as Proof of Funds for House Purchase & Sale

So, you’ve found a property you want to buy, and the mortgage is looking like it will come through, so you have to get all the paperwork you need in line. 

One of the most important things to get sorted is your proof of funds documentation, but what does that actually mean? 

Put simply, a Proof of Funds (POF) is a document or statement that demonstrates a person's financial ability to complete a big transaction. A Proof Funds is typically required to show that the buyer has sufficient funds available to cover the purchase price and associated costs, which should ensure a sale can go through.

When you buy a property in the UK, the seller or their representative may request a Proof of Funds to ensure that the buyer has the financial capacity to complete the transaction. This document is usually provided by the buyer's bank or financial institution and confirms the availability of funds in the buyer's account or from a mortgage.

However, whilst an important aspect of buying a house, proof of funds can also play a big part in the sale of your current property as well. This is because many home sellers will be relying on the funds from the sale of their home in order to help fund their next purchase. 

In this blog post, we will be looking at what stage you will need to provide proof of funds when buying a house, what is classed as a proof fund, and how we can help you secure the funds. 

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What is included in proof of funds letter? 

As with any aspect of a house selling or buying process, it is important to understand what you are being asked for, and what it includes. A proof of funds letter will typically include the following information: 

• account holders name

• account balance 

• date of the statement 

This letter will assure the seller that the buyer has the necessary financial means to proceed with the purchase. 

However, you should note that the specific requirements for Proof of Funds can vary, and buyers should consult with their real estate agent or legal advisor to understand the exact documentation needed for their property purchase. 

How do I get a proof of funds document? 

You are going to want to get the ball rolling and contact your bank or financial institution. 

Reach out to your bank where you have the funds available for the property purchase and let them know that you need a Proof of Funds letter for a property purchase. 

The bank will likely require important details such as your name, account number, and the amount of funds available. Make sure to ask both the bank and your solicitor about any additional information or documentation they may need for the purchase to go smoothly. 

Be sure to specify any details that should be included in the letter, such as the account balance and date of the statement, otherwise, it may take longer than you would hope. Once your bank has pulled together the necessary information, they will issue the Proof of Funds document, hopefully with everything you need included.  

This document should be on official bank letterhead and signed by an authorised representative of the bank, if either of these things is missing make sure you follow up as soon as possible to keep the ball rolling on your purchase. Now, if everything is in order, share the Proof of Funds document with the seller, their agent, or other relevant parties involved in the property transaction. 

Sadly, this is not something you can have ready and waiting before you have even got the ball rolling, this document needs to be dated recently, preferably within a month or two of having to provide it as it really needs to reflect current financial circumstances - things personally and economically can change quickly.  

Who will see the document? 

This important document is typically only shown to the seller or the seller's agent and legal representation, during the process of buying the house.  

When do you need to show proof of funds when buying a house

Typically, you'll need proof of funds when you make an offer on a property. Without it, an estate agent will be unable to accept an offer from you as they require a mortgage in principle or evidence that you have access to the cash funds required upfront. 

Once you get an offer accepted, your solicitor will also require proof of funds to ensure you are able to purchase the property and complete the sale. 

Should you decide to explore a property auction as a method for purchasing your next home, you'll need to show proof of funds in order to purchase. This is because auctioneers are tough on fraud and money laundering, so will require this upon registration. 

Do I need to provide a proof of funds letter when buying a house? 

 Yes, you do. And if you decide not to, then you’re not purchasing that property.   

The person selling the property may view the inability to provide a Proof of Funds as a sign of uncertainty or risk, and if they have another potential buyer who can, they are far more likely to go with them instead. 

You may also find yourself unable to negotiate. 

 Negotiating the terms of the sale may become more challenging because sellers may be less willing to negotiate on price or other terms if they are uncertain about the buyer's ability to secure the cash to actually buy their property. 

Are there any circumstances where proof of funds for house purchase will not be necessary? 

There are a few situations where proof of funds will be less necessary. 

You may know the buyer well. If you have a well-established relationship and they are already aware of your financial position, they may be more willing to proceed without a formal Proof of Funds.  

While it isn’t very common, a cash buyer may mean there is no need for proof of funds.  

In cash buys where the entire purchase price is being paid upfront in cash, the nature of the offer itself may be sufficient proof of financial situation. However, some sellers may still request Proof of Funds for documentation purposes in case any issues arise later down the line. 

Pros and Cons of Cash Buyer Proof of Funds

By using a cash buyer, you are able to secure immediate proof of funds as you are selling your property. You will also be able to sell your property a lot quicker as there is no chain and no waiting for mortgages to be approved. Selling through a cash house buyer ensures you are getting a quick sale that is secure and without fees and commission. 

However, the downside to receiving proof of funds through a cash buyer is that you will not get 100% market value for your property. In return for a quick, free, and secure sale, cash buyers will be unable to offer full price for your home. However, many sellers are willing to overlook this due to the speed and security they receive in return. Regardless of condition or location, a cash buyer will be able to purchase their home in a timescale to suit them. 

Whats the difference between proof of funds and proof of deposit

The key distinction between proof of funds and proof of deposit lies in their respective purposes within financial transactions.

Proof of funds is a document, often in the form of a bank statement, that confirms an entity's, whether an individual or company, readiness, and availability of funds to execute a specific transaction. This document assures the seller that the buyer possesses the necessary funds for the proposed transaction and that the payment will come from a verifiable source, typically a bank. Importantly, proof of funds generally pertains to liquid capital or cash, excluding assets like life insurance or retirement accounts.

On the other hand, proof of deposit is a document that verifies the deposit of funds into an account, particularly in the context of a large purchase or down payment. This letter is commonly required in mortgage applications, where it provides the mortgage lender with evidence that the borrower has lawfully obtained the required funds for the down payment. Additionally, proof of deposit enables the lender to assess the source of the deposited funds, ensuring that they are from a reliable and regular income stream, which is crucial for ongoing mortgage payments. The proof of deposit also serves to validate that the amount of a deposited check matches the account being debited, ensuring the integrity of the transaction.

In summary, while proof of funds attests to the availability of funds for a transaction, proof of deposit specifically verifies the deposit of funds and their source, particularly in the context of mortgage applications.

What can I use for proof of funds document?

The most common document used for proof of funds is a bank document, However, there are other proof of funds when buying a house. You can use a pre-approval letter from a mortgage lender instead of or as part of a proof of funds in some circumstances. 

Now, perhaps you are being gifted a significant amount of money that will allow you to buy the house. 

If you are receiving a gift of funds from a family member or friend, a gift letter accompanied by the donor's bank statement showing the source of funds may be acceptable. 

Another proof of funds document you can use is cash buyer proof of funds. This means proving you are actively selling your home to a cash buyer, and so will have the cash in your bank shortly. 

Other documents you can use include: 

• Recent bank statements, preferably spanning the past month or earlier, reflecting either the entire cash amount or a deposit equivalent to a minimum of 15%.

• A comprehensive mortgage agreement or decision in principle (abbreviated as AIP and DIP, respectively), combined with the deposit, ensuring coverage of 100% of the agreed sale price.

• Adequate funds earmarked for completing the sale, encompassing expenses such as Stamp Duty Land Tax (SDLT), legal fees, and estate agency charges.

• Documentation verifying eligibility for the Help to Buy finance grant.

• Financial records, if self-employed or managing a personal business.

• Proof of recently received funds as a gift or through probate.

• Verification of an ongoing property sale, attesting to the required amount, and specifying the definitive completion date of the transaction. 

• Confirmation of financial source, particularly for overseas buyers.

• Validation of dividends received or shares sold.

• Official documentation detailing a pension payout.

• Verification of a cash prize or lottery win, supported by relevant documentation.

How do I get money for Proof Funds? 

If you are looking for cash in order to provide the money necessary for your proof of funds for house purchase, then look no further. 

We are The Property Buying Company, a genuine cash buyer who can purchase your property in a timeline that suits you. Whether you are looking for a speedy sale to generate cash for proof of funds or you are simply looking for a fast and secure sale, we can purchase your property outright without the need for a loan or mortgage. We tailor our service to meet your needs, meaning regardless of whether you want to sell in 3 months time or in as little as 7 days we can purchase your property fast. 

Furthermore, when you sell with us, we will cover all of the fees you would typically associate with selling your home! It's just one of the ways we make selling easy and help take the stress out of the house-selling process. 

When you sell with The Property Buying Company, you are in good hands. Don't believe us?  Check out our Trustpilot, with over 1,000 reviews rating us as excellent. We are also proud members of both the National Association of Property Buyers and The Property Ombudsman.  

For a chain and fee-free service that is quick and simple, we can help, meaning all of the worries you may have about selling are handled by real experts. 

If you are ready to sell your home fast to secure proof funds, get in touch today and fill out one of our free, no-obligation forms to receive your CASH offer! 

Ready to get the ball rolling? Just fill in your postcode below!