Proof of Funds Letter in Real Estate Transactions

When you’re involved in a financial transaction as complex and high-stakes as a home sale, you want assurances, as a seller, that a prospective buyer has the ability to perform under the terms of the contract. In other words, you want (and need) assurances that a buyer can pay the agreed-upon price. The proof of funds letter is crucial in this situation for the sellers (and, often, the buyer). 

What are the Contents of a Proof of Funds Letter?

Most often, prospective homebuyers will get a proof of funds letter from their bank or financial institution. To send the letter, the financial institution needs proof that the buyer has liquid funds to cover either the full cost of the property or the down payment (plus various closing costs). The essential elements of a standard proof of funds letter from a bank generally includes the prospective buyer’s name, account information, amount of liquid funds available, and affirmations that the letter actually did originate from the financial institution. 

In most cases, money market accounts and credit lines will also suffice for proof of funds. However, it is not wise to accept money that is tied up in mutual funds or stocks (or other illiquid funding sources). If you are buying a house, you should presume that a proof of funds letter is required by the seller. 

Mortgage Pre-Approval

Buyers who will be borrowing on a mortgage loan have a slightly different protocol for proving funds to a seller. In this situation, the buyers will generally need to provide a mortgage pre-approval letter. This is a document sent by the lending institution. To receive a valid pre-approval form, the lending institution will often require some type of proof of funds from the borrower. So, requiring both a pre-approval and proof of funds letter might seem redundant to a buyer. Your real estate agent will give you advice on what, exactly, you should require of a buyer. 

Verify the Authenticity of Proof of Funds Letter

Real estate transactions are much more complex than they were in decades prior. Unfortunately, states have had to implement ways to protect consumers engaging in these types of transactions due to the potential for fraud. One way this is manifested is when “buyers” attempt to pass off fake proof of funds letters. These can be caught by an eagle-eyed realtor, but they can still cause trouble for the seller. 


For many people, buying or selling a house is the most complex financial transaction they will ever be directly involved with. This is why homebuyers and sellers need professional representation during the process to ensure the process goes smoothly and problems do not crop up down the road. Protecting individuals involved in residential transactions is a cornerstone of Velazquez Consumer Law, LLC, and we would be honored to represent you during your next real estate deal. Call our firm at 630-576-9030 to receive a free consultation today.

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