How Do I Show Proof of Cash to Buy a House?
When you are buying property, there are many different documentation and forms you need to fill out and present when proceeding with the process. Although there are some things you don’t necessarily need if you are buying a property with cash, one that is required whether you are seeking a mortgage or not is known as proof of funds. If you are new to the property buying process and are buying a property with cash, you may wonder how you present this information.
In the following article, we are going to help you. Before we discuss how you can show proof of funds, we are going to first look at what proof of funds is.
What is Proof of Funds?
Proof of funds is the name given to the evidence that shows you have the money, or funds, necessary to make the purchase for the property that you are making an offer for. The most basic form of proof of funds is a bank statement that shows the balance available in your bank account if you are intending on buying with cash. Another part of the proof of funds is what is known as the source of funds. Self-explanatory, source of funds is evidence that shows how you got the funds you intend to use for buying the property.
Why Proof of Funds is Important
When large sums of cash are involved in a transaction for a big purchase, such as property, proof of funds is important. Not only does it give the seller confidence that you have the available funds necessary to make the purchase. If you can’t prove you have the funds necessary, especially when buying a property with just cash, you are wasting the seller’s and your own precious time.
What is Included in the Proof of Funds?
So, now that we have established what the proof of funds is and why it is so important, let us discuss what is included in it. Ideally, your proof of funds, in whatever form it comes, should include the contact details of the bank with whom you have the account where the money that you are going to use to buy the property, as well as the cash you have available in your main bank account and any money you have in savings accounts you may be looking to use to complete the transaction.
This should be included with a signature from an official representative of the bank.
In Place of a Proof of Funds Letter from the Bank
If for whatever reason, you are unable to obtain an official proof of funds letter from the bank, you may be able to give relevant copies of bank statements showing that you have the available funds necessary to make a purchase on the property. If you are unsure if this will be acceptable or not, ask the seller to check with their solicitor.
Make Sure You Avoid These Common Mistakes
It sounds straightforward, right? You simply get an official letter from your bank that outlines how much money is in your account, the contact details of the bank and a signature from a bank representative. Despite sounding very simple, there are still several potential mistakes you need to avoid. You need to remember that the bank will only consider what is known as liquid assets as available funds when creating your proof of funds. This all ties back in with the main prerequisite when buying with cash – you need to have the cash in money form to buy the property. It doesn’t really matter if you would have enough money for the sale price if you sold your current home or car. The money needs to be in your current account and/or any savings accounts you may have in your name.
Another key mistake some property buyers make is submitting their proof of funds after they have made an offer. When really you should submit it before, as this will iron out any potential issues and may give the seller further confidence in selling to you, rather than getting cold feet and pulling out or looking for someone else.