Proof of Funds Letters to Get Your Property Under Contract Quickly (2024)

What is a proof of funds letter?

Once a property is listed for sale, the seller wants to attract as many potential buyers as possible to increase the chances of it selling quickly. They’ll not want to do anything that will jeopardize that action taking place. As they are fielding queries about that listing, one of the most important things they’ll be asked is about the availability of the property. They’re only going to want to have to tell people it is under contract if they’re relatively sure of the buyer. And that is where the verification of funds letter comes into play.

A seller is not going to want to turn away interested parties unless they feel good about any offer they may have accepted. One of the most important aspects of that is being assured that the buyer will have the money to complete the purchase. And that is where a proof of funds letter comes into play.

A seller wants something other than a promise and a smile from the buyer. A properly worded verification of funds letter will give the seller the confidence to put their property under contract.

When it comes to real estate investing, knowing how to properly word your proof of funds letters is crucial to gaining sellers’ confidence and trust.

This type of POF (Proof of Funds) differs from the kind you would get if you were trying to get a mortgage.

Does a POF (Proof of Funds) letter mean I have been approved for a loan?

No. A proof of funds letter and preapproval are two separate things. A POF letter states that the money is available for the property purchase should specific criteria be met. That is something that you need to understand. When you download a POF from The Investor's Edge, we’re not approving a loan and we’re not even saying that the deal you are pursuing is a good deal. Real estate investment revolves heavily around you researching to decide that a property is worth pursuing. A verification of funds letter gives the property seller enough confidence to allow you access to the property in order for you to complete your due diligence. They’re not going to let just anyone send in appraisers, contractors, and inspectors. But those are the next steps you’ll need to take in order to determine whether or not the deal has a good chance of being profitable.

A pre-approval letter is not the same thing.

Why do I need verification of funds? An important component of real estate investing success is timing.Finding the right propertyowned by a motivated seller is one aspect of that. And those motivated sellers want to know that if they accept your offer that you’ll be able to follow up so that they don’t lose valuable time or other potential buyers.

When should I get a POF (Proof of Funds) Letter? After you have determined that you want to make an offer on a property, the next step will be obtaining your proof of funds to show the seller in order to move the process along.

How do I get a proof of funds letter?

If you are needing a proof of funds letter for a real estate investment, specifically for arehab investment, then the easiest and best answer for this is to use our Proof of Funds Service.

When we issue a verification of funds letter, that in no way indicates that you have been approved for a loan on that property. Our proof of funds letters will always stipulate that the deal needs to meet our lending criteria. What the proof of funds letter tells the seller is that The Investor's Edge does indeed have money available to fund should the property qualify and the borrower is able to complete all of the other steps that would be necessary for closing to take place.

Understanding how verification of funds fits into your real estate investing business will help you approach each possible deal with confidence. Once you understand how The Investor's Edge’s funding process works you’ll be able to streamline your own processes so you can keep things moving in the direction you need and at the pace you desire. So many new real estate investors don’t understand how to utilize proof of funds letters to maximize the number of deals they can pursue. Experienced real estate investors will tell you that they usually need to look at 50-100 potential deals in order to find one that will bring them the desired profits. This makes having a reputable lender behind you incredibly important.

The importance of getting a property under contract cannot be overstated, as this will allow you to get better contract bids and estimates. It will allow you to obtain the inspections that you need. Having that contract makes it possible to get the information you need about the property title and history. Having the property under contract is necessary for everyone else to take you seriously. Getting the proof of funds for yourreal estate flipis crucial.

After I use my POF (Proof of Funds) letter, how do I get my funding?

The Investor's Edge WANTS to fund your deal!

Once you’ve determined it is time to move forward, you can fill out a funding application and schedule an appointment to discuss the viability of your deal and proceeding with the evaluation and funding. If you want to speak with a member of our team before getting the property under contract, we can discuss some options with you.

Our members with a property under contract can run numbers with a member of our funding team to determine whether or not to proceed with a deal, conduct more due diligence, and walk through with your contractor. Because we are experienced in fix & flip investments and land flipping, we can guide you in ways that another lender cannot. Getting a proof of funds letter from a lender specializing in funding for new investors is also helpful. In working with thousands of beginning flippers, we have come to recognize common mistakes that first-timers make.

Proof of Funds Letters to Get Your Property Under Contract Quickly (2024)

FAQs

How do you show sufficient proof of funds? ›

What A Proof Of Funds Letter Looks Like
  1. Your bank's name and address.
  2. An official bank statement, either printed at a branch or as an online statement.
  3. The balance of total funds in your accounts.
  4. The balance of funds in your checking or savings account.
  5. The signature of an authorized bank employee or notary.

What is a proof of sufficient funds letter? ›

A proof of funds letter, or POF letter, proves you have the funds to buy a home. You might need one whether you're getting a mortgage or paying for the property with cash. Many mortgage lenders allow you to provide bank statements as proof of funds. In some cases, though, you might need a formal letter.

What is sufficient for proof of funds? ›

A bank statement, security statement, or custody statement usually qualify as proof of funds. Proof of funds is typically required for a large transaction, such as the purchase of a house.

How long does it take to get a proof of funds letter? ›

Request a POF letter from your bank

Ask the financial institution holding your assets for a proof of funds letter. Some banks have an online form to fill out while others may require you to come into a branch. Either way, it usually takes no more than a week to receive the letter.

Why do realtors ask for proof of funds? ›

A realtor asking for proof of funds (POF) reassures them and the home seller that you're a serious buyer capable of purchasing the home you want. Realtors often encourage sellers to ask for proof of funds along with a pre-approval letter from their lender to cover their bases.

What is a hard proof of funds? ›

A Hard Money Proof of Funds letter tells the world that you're pre-approved for financing drastically different from a regular loan. It sends a message that your funding is not contingent on property inspections or complex underwriting.

Can I show my credit card as proof of funds? ›

Credit cards are not proof of funds. They are proof of debt.

Is proof of funds binding? ›

A proof of funds statement or letter doesn't cost the investor anything. It's not legally binding, and it doesn't require the investor to invest any money at all. So there is no obligation whatsoever on the part of the investor.

What is a letter of financial capability? ›

What Is a Letter of Financial Capability? A letter of financial capability or comfort letter is a document that demonstrates your business's ability to pay its people and bills and execute well. The contract that you expect to win will be attached to this letter.

What is a source of funds example? ›

A legitimate example of a source of funds can include anything where the money was obtained through legal means, such as: wages, bonuses, dividends, and other income from employment. pension payments. interest from personal savings.

Can I get a proof of funds letter online? ›

It is not recommended that you use a free proof of funds template you find on the internet. A falsified proof of funds letter is very likely to get you into legal trouble, it could even be seen as a fraud. You should get your proof of funds letters from a reputable bank or hard money lender like we do.

How long are proof of funds good for? ›

Proof of cash or funds letters don't have a hard expiration date, but they don't last forever. Their entire purpose is to verify how much money you have right now.

How to provide proof of bank account? ›

Accepted forms of proof
  1. Bank statements.
  2. Deposit slips.
  3. Cheques.
  4. Download 'Proof of account balance' document from bank (blank out account balance)
6 days ago

What is proof of funds and source of wealth? ›

Source of Funds (SOF) is the origin of fund used in a specific business transaction, while Source of Wealth (SOW) looks more broadly at the total assets of the parties involved in the transaction.

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