Proof Of Funds

When you are hunting for a home in NYC, it helps to be prepared. Fail to move fast enough, and you could lose out to another buyer that is organized and has everything submitted. One crucial step every buyer should include with their offer is what’s called a proof of funds letter. If you’re new to the real estate game here’s what you need to know about this document and why it’s so important.

What is a proof of funds letter in real estate?

Proof of funds letter is a document which certifies that a buyer has enough funds to cover the transaction. Sellers are very unlikely to take an offer seriously if it’s not included in the offer. Otherwise, how can they know that the buyer can close on the purchase?

Even if you’re receiving financing for the purchase, you’ll still be expected to provide one. After all, there’s still the matter of the down payment (usually 20% of the purchase price) and the closing costs (an additional 3-4% of the purchase price).

What about my pre-approval letter, doesn’t that count?

Actually, no. A pre-approval letter is only a lenders commitment to provide the buyer with a home loan. These are two separate documents and should not be confused with one another. The proof of funds letter will still be needed to show that you have the funds to close the sale and where you’re holding the funds.

What counts as proof of funds?

Most buyer’s get their proof of funds letter from their financial institution where the money is being kept. This is typically from a bank but can also be an open line of credit or money market account where funds can be withdrawn quickly. It usually comes on an official document and is signed by a senior representative or officer of the bank.

It does not have to disclose the exact amount the buyer has in the bank. All that is needed is for it to disclose that the funds are more than the purchase price or deposit/closing costs including post-closing liquidity when financing.

Proof of funds letter can also be a simple bank statement or investment account statement. If you go this route know that it’s perfectly acceptable to ink out the account numbers for your privacy.

Must I include anything else with the proof of funds letter?

That depends, are you buying a co-op or condo? If it’s a condo purchase, then the listing agent may be fine with just the offer price and proof of funds for an all-cash offer. But if it’s a co-op purchase, then you’ll still be expected to provide a completed REBNY Statement, even if you’re making an all-cash offer.

The reason being that co-ops have stringent financial requirements and want to see that you have sufficient liquid assets post-closing and income. The required amount will vary from one co-op to another so have your buyer’s agent confirm how much is needed before you make an offer.

Regardless, if you’re serious about closing, you should still include a REBNY statement, along with your attorney’s contact information and a home buyer offer letter.

Sample proof of funds letter

Most banks have their proof of funds templates on file which can be filled in as needed. They will vary in the details given but at a minimum will include the following:

[Date] [Return Address]

To Whom It May Concern,

We confirm, that our client _____ [Name of Company/Individual] ______ has available a sum in excess of __________ as of this date with _____ [Name of Financial institution] ______. Should you require verification of the above-mentioned funds, please contact us at your convenience.

Yours truly,

[Authorized Officer]

Date: _____

Contact Info: __________


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