Proof of funds type document?

JamieMarch 16, 2011

In past home purchases I have acquired some kind of document that says I can get a mortgage of x. Some sellers like to see such a thing.

I am now shopping for a home to purchase with cash. The cash is not in a bank such that I can go to my friendly retail banker and ask for help. I'll have to go through the customer service of the large institution where we have our money, so I'll have to know what I want in order to get through the phone prompts and helpful customer service departments.

What document should I ask the financial institution for that will satisfy what the "approval for mortgage" used to do?

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dreamgarden

I just paid cash for a house. I talked about this with my local bank branch manager while I was house hunting. I've been with this bank for more than 20 yrs so he knows me well.

He said since I am paying cash, there isn't anything to 'verify' except that I have enough funds to complete the purchase. He also said that my net worth or how many accounts with other banks/brokerages I have aren't anyone else's business.

He gave me several of his business cards and said to share these with any sellers who ask for this info. He said he would verify that I was good for the specific (agreed upon ahead of time) amount in question and would not tell them anymore than they need to know.

    Bookmark   March 16, 2011 at 12:00PM
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marie_ndcal

Sounds like you have a good manager, but the way some of the banks are going now, the "manager" will tell you to fill out an application first, then go from there. That happened to us when we looked at cars a few years ago. All we asked for is what would the rates be if we borrowed xxx amount. They would not even quote interest rates, After we went with another company, we got a turn down letter, and I (being a former bank employee) got very hostile and demanded and got a letter from the bank stating that we were NOT turned down by the bank, but chose a different lending institution. I also informed them that if it turned up on our credit report, their CEO would hear about it.
Some banks work with the customers, some don't.

    Bookmark   March 16, 2011 at 1:49PM
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rafor

I've owned several houses over the years. Last year was the first time I paid cash for one. I was buying a house where the owners were underwater and the bank was involved. The bank wanted a letter from my bank saying I had the funds available. Problem was, the money wasn't in just one bank. It was spread around among several and I wasn't about to pony up a letter from each bank. But I had plenty of money in my IRA, so I got a letter from my brokerage firm stating I had X amount in my account ( and that amount was over the price of the house even though I knew I wasn't taking a dime out of that account to buy this house!). The part in parentheses was not included in the letter :) That satisfied the seller's bank and everything went ahead as planned.

    Bookmark   March 16, 2011 at 1:49PM
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brickeyee

I usually eliminate any questions by having a LARGE earnest money supplement after the contract is accepted.

I lose a little interest on the cash, and have the risk of trying to get it back if the seller cannot deliver clear title, but it usually stops ALL the questions.

Throwing out $100,000 tends to make people shut up and move.

    Bookmark   March 16, 2011 at 4:19PM
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sylviatexas1

If I were the seller or if I were representing the seller, I'd insist on a proof-of-funds letter;
a large earnest money deposit doesn't mean that the buyer has another dime.

    Bookmark   March 16, 2011 at 5:59PM
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barbcollins

We bought a foreclosure at the end of 2009 for cash and needed a letter from the bank.

Our realtor warned us to only put the amount needed per the offer. He said if they see you have much more, they might decline the offer.

Something to think about if you are putting a low offer on a foreclosure.

    Bookmark   March 16, 2011 at 9:55PM
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LoveInTheHouse

I was preparing to buy a house for cash (until my own home sale fell through) and was using the funds from my sale so there was no proof of where the money was. We just put it in the contract that it was contingent upon the successful closing of our home and we were paying cash with the proceeds. Sellers love cash buyers especially nowadays. I don't think they'll be picky. My people weren't. The seller, the seller's agent, and the lawyer who drew up the contract--none of them asked for anything more other than a copy of my contract on my house proving we were in, what we thought at the time, was a solid deal. And I only gave a two thousand dollar earnest money deposit. Hope that helps.

    Bookmark   March 16, 2011 at 11:40PM
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kats_meow

When we bought a house with proof of funds we provided a copy of our financial institution statement showing the funds (we blacked out the account number and other personal information). We didn't provide proof all of our assets by the way, just enough to show that we could make the purchase. When we had buyers paying cash, they did the same thing.

    Bookmark   March 17, 2011 at 1:55AM
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linda117117

What document should I ask the financial institution for that will satisfy what the "approval for mortgage" used to do?

A proof of funds letter isnt satisfaction for what an approval for mortgage used to do.

A proof of funds letter is used when you arent applying for a mortgage. It is "proof" that you have the money available to you WITHOUT applying for a mortgage.

Also, for the poster who commented about being a 'cash offer' contingent on the sale of their house. This is not a cash offer. If there is a contingency for a mortgage to go thru, (either yourself or your buyer on the sale of your house), it is not considered a cash offer. Cash offers are offers with "no contingencies" for any type of financing, whether it be your own, or the house you are selling. A cash offer means you have the cash available to you today, not 2 months from now.

    Bookmark   March 17, 2011 at 8:39AM
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brickeyee

"f I were the seller or if I were representing the seller, I'd insist on a proof-of-funds letter;
a large earnest money deposit doesn't mean that the buyer has another dime."

Since there is no such thing, just like with pre-qual letters you are actually just wasting your time.

If a buyer is putting $100,000 at risk and then defaults just take the money and be happy.

    Bookmark   March 17, 2011 at 9:31AM
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linda117117

Brickeyee, are you saying there is no such thing as a proof of funds letter? I can show you a draw full of them. PROOF OF FUNDS: a letter from a financial instituation on letterhead stating that this particular buyer HAS THE FUNDS IN HIS ACCT to purchase a property up to such and such amount.

In my state, putting money on contract doesnt mean the buyer will lose their money if they default.

    Bookmark   March 17, 2011 at 5:28PM
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brickeyee

"Brickeyee, are you saying there is no such thing as a proof of funds letter? I can show you a draw full of them. PROOF OF FUNDS: a letter from a financial instituation on letterhead stating that this particular buyer HAS THE FUNDS IN HIS ACCT to purchase a property up to such and such amount.

In my state, putting money on contract doesnt mean the buyer will lose their money if they default. "

And they are barely worth the paper they are printed on

The funds could have been withdrawn 10 minutes after the bank signed the letter.

If the contract is drawn worth a darn and the buyer defaults the money is in jeopardy.
That is the purpose of the earnest money.
To try and ensure the buyer fulfills the contract.

It is not a default when a contingency is not meant, such as a financing contingency, appraisal contingency, inspection contingency, etc.

If a buyer simply refuses to complete the transaction, the seller is generally entitled to the earnest money.
If they are not, why bother even offering or collecting it?

    Bookmark   March 17, 2011 at 8:30PM
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Billl

Even if a contract has contingencies, a big earnest money deposit gets attention. It is a real head turner and will let the seller know that you are willing and able to move fast on a deal. In this market, that is a HUGE plus.

    Bookmark   March 18, 2011 at 9:52AM
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brickeyee

"It is a real head turner and will let the seller know that you are willing and able to move fast on a deal."

That is why I use the tactic occasionally.

I once even gave a briefcase of cash to a seller who was older and not comfortable with checks and such.
It took the bank only one day to get me $50,000 in hundreds, but the lady lit up when she saw the money was real and would soon belong to her.

    Bookmark   March 18, 2011 at 10:13AM
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sylviatexas1

If a buyer provides proof of funds & then refuses to close, the seller doesn't have to take the earnest money & go off to lick his wounds;
he can sue for specific performance.

    Bookmark   March 18, 2011 at 12:24PM
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linda117117

And they are barely worth the paper they are printed on

In NY you are right. Contracts are not worth the paper they are written on. It is rare that a buyer chances it and walks away, however, I have seen it done. Most attys dont want to take a case to sue for specific performance.

But this has nothing to do with a proof of funds letter. Yes, the buyer can withdraw the money 10 minutes later, but what would be the point of that? He is obviously trying to buy a house. Generally, people arent going to go thru the trouble of getting a proof of funds letter for the sake of getting it. The proof of funds letter is to get him to the contract stage. He will sign a contract stating the money is in such and such acct and he has shown "proof of funds".

    Bookmark   March 19, 2011 at 8:24AM
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brickeyee

"Generally, people arent going to go thru the trouble of getting a proof of funds letter for the sake of getting it."

When sellers demand ridiculous items I tend to just walk away.

Banks are the last place to keep a very large deposit.
Unless you break it up you can quickly run over the FDIC limits.

Breaking the amount up can also limit returns on the separate accounts.

Brokerage accounts at least have higher insurance limits.

Just like 'pre-qualification' letters it is a paper exercise designed to try and assure the less informed.

I can get a 'pre-qual' letter for the asking from any number of banks and mortgage brokers with nothing but a phone call.

They usually are amused when I even call them.

NY, home of the 'RE attorney full employment purchasing system' is very different from the vast majority iof places.

In the real world sellers prepare an offer, buyers accept the offer by signing, and a contract has been established.
Attorneys become involved, if at all, only at closing when actual title of the property is transferred.

    Bookmark   March 19, 2011 at 9:31AM
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linda117117

Brickeye, if you're not in this business doing it every day, you have no idea what a ridiculous demand is. A proof of funds letter, and a good pre approval letter are protocol in my area. Its not unusual for an agent to get it and generally people dont balk at being asked. If you do, it probably means you can't. If you think its ridiculous and would walk away, most agents would let you walk. I certainly won't waste my time on a buyer who "says" they can afford something but has no proof that they can. When I was green behind the ears I wasted many many saturdays spending time with dreamers. I take people out one time, the next time they have the letter or we dont go out until they do.

Last Oct I took out a very nice couple. He worked for IBM. We were looking in the $525k range. They put an offer in on a house (First day). We had an accepted offer at $510k. Because it was our first time out, he hadnt yet gotten his pre approval. When he called the bank the next day, guess what, he qualified, but had no idea the payment would be so high on that mortgage. He wasnt comfortable buying a house for $510k. We are now searching in the $350k range. THe problem is, now that he has looked at homes outside of his affordable range, nothing looks good to him. THAT is the reason for a pre approval letter.

It may seem ridiculous to you, it is necessary to an agent who does this for a living.

    Bookmark   March 19, 2011 at 1:07PM
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linda117117

Throwing out $100,000 tends to make people shut up and move.

Really? That sounds incredibly cocky. I have a buyer right now who has $100k cash to put down. He makes $40,000 a year. Mommy gave him the money. He can't go above $150k mortgage.

    Bookmark   March 19, 2011 at 1:10PM
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brickeyee

"A proof of funds letter, and a good pre approval letter are protocol in my area. ":

Nice wast of everyones time.

The pre-approval letters are NOT loan commitments, and normally say so plainly on the letter.

It really has little to no value excepot to make folks feel better, facts be damned.

The buyer can easily alter their credit situation enough to fail to secure a loan.

I am not about to reveal all my financial details to a seller to convince them I can purchase.
Maybe they will have better luck with the next buyer.

I had one seller ask to see tax returns.
I picked up counteroffer from the table and tore it up in from of them.

None months latter they are still looking for a buyer having lowered the price well below my cash offer.
My RE agent wants me to make another offer.

I am not about to do so.
I think they would be a real PITA to deal with, even with a cash offer and no contingencies.
They left a VERY bad taset5 in my mouth.

    Bookmark   March 19, 2011 at 2:44PM
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sylviatexas1

Is proof of ability to close a ridiculous request if you're the one selling?

    Bookmark   March 19, 2011 at 3:16PM
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ncrealestateguy

Brickeye,
If you are my buyer, you show me a Proof Of Funds Letter, or a pre approval letter , or you don't get my services. No one is questioning your ability, you just have to prove it, or your offer will go nowhere here in NC. Do you realize how many "rich" folks out there that are pretty much broke? There's a bunch of them.
Also, you must not purchase foreclosures nor short sales, because that is the first thing the lenders want to see.
And they will not be impressed by you tearing up the offer either.

    Bookmark   March 21, 2011 at 6:56AM
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linda117117

I am not about to reveal all my financial details to a seller to convince them I can purchase.
Maybe they will have better luck with the next buyer.

They probably will because your offer most likely will go no where. FYI, a proof of funds letter and a pre approval letter does not reveal all of your financial details. A pre approval letter simply states that you took the time to call a mortgage professional, they checked your credit and based on the information you provided, you qualify for a mortgage. (doesnt mean you'll get one, just means you have the credit and income to get one).

A proof of funds letter simply states that if you are purchasing a property "cash", you have those funds available to you to purchase cash.

I think they would be a real PITA to deal with, even with a cash offer and no contingencies.
They left a VERY bad taset5 in my mouth.

Hummm, LMAO! Alot of that going around.

    Bookmark   March 21, 2011 at 7:45AM
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brickeyee

"They probably will because your offer most likely will go no where."

Funny. it has worked very well 30-40 times over the past 20 years, most recently this past autumn on two properties.

All hail the NY RE attorney full employment act (I blew of a NY buyer a year ago who tried their scheme in Virginia instead of learning how contracts are offered and accepted here).

    Bookmark   March 21, 2011 at 7:56AM
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dreamgarden

"Brickeye, if you're not in this business doing it every day, you have no idea what a ridiculous demand is. A proof of funds letter, and a good pre approval letter are protocol in my area."

Not in this business doing it every day? lol.

If you have read Brickeye's posts for awhile, you would see that he does do this sort of thing pretty darn regularly.

    Bookmark   March 21, 2011 at 9:40AM
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ncrealestateguy

Not in this state nor most states he does not. No matter what he says, it is protocol in most states to show proof of funds or have a pre qual letter.
And like I said earlier, if he wants to buy from a bank, he will have either one of them to play ball.

    Bookmark   March 21, 2011 at 6:14PM
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sylviatexas1

"he does do this sort of thing pretty darn regularly"

Are you sure?

I've worked with real estate investors, & most of them would have their banker send me the proof of funds letter for the amount of the offer;
not one of them would refuse to provide a proof of funds letter, & not one of them would get dramatic & tear up an offer.

    Bookmark   March 22, 2011 at 10:56AM
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