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When you are looking for a home in NYC, it helps to be prepared. One crucial step every buyer should include with their offer is a proof of funds letter. As a first-time buyer, you must know about this document and why it’s essential. Fail to move fast enough, and you could lose to another organized buyer who has everything submitted.
What is a Proof of Funds letter?What is a Proof of Funds letter?
A proof of funds letter is a document that certifies that a buyer has enough funds to cover the transaction. Sellers are unlikely to take an offer if not included in the offer thoughtfully. Otherwise, how can they know that the buyer can close the purchase?
Even if you’re receiving financing for the purchase, expect you to provide one. After all, there’s the matter of the down payment (usually 20% of the purchase price); closing costs (an additional 3-4% of the purchase price).
What about my pre-approval letter, doesn’t that count?What about my pre-approval letter, doesn’t that count?
Actually, no. A pre-approval letter is only a lender’s commitment to providing the buyer with a home loan. You will still need the proof of funds letter to show you have the funds to close the sale and where you’re holding the funds. These are two separate documents and should not be confused with one another.
What counts as proof of funds?What counts as proof of funds?
Most buyers get their proof of funds letters from their financial institutions where the money is kept. It usually comes on an official document and is signed by a senior representative or officer of the bank. Typically from a bank, it can also be an open line of credit or money market account where funds can be withdrawn quickly.
It does not have to disclose the buyer’s exact amount in the bank. When financing, all that is needed is to reveal that the funds are more than the purchase price or deposit/closing costs, including post-closing liquidity.
A proof of funds letter can also be a simple bank or investment account statement. If you go this route, know it’s perfectly acceptable to ink out the account numbers for your privacy.
Must I include anything else with the letter?Must I include anything else with the letter?
Are you buying a co-op or condo? That depends. If it’s a condo purchase, the listing agent may be okay with just the offer price and proof of funds for an all-cash offer. But if it’s a co-op purchase, you’ll still be expected to provide a completed REBNY Financial Statement and personal and professional reference letters, even if you’re making an all-cash offer.
Coops 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 making an offer.
Regardless, you should still include a REBNY statement if you’re serious about closing. Along with your attorney’s contact information and a home buyer offer letter.
Proof of Funds Letter SampleProof of Funds Letter Sample
Most banks have their proof of funds templates on file; and filled 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] ______. Please contact us at your convenience if you require verification of the funds mentioned above.
Yours truly,[Authorized Officer]
Contact Info: __________