What is Proof of Funds?
December 13, 2022 1:46 pm
Are you buying a house… have you been asked for ‘Proof of Funds’?
What qualifies as Proof of Funds?
Whether you are planning to make a cash offer or you have applied for a mortgage to purchase property, you will be required to provide “proof of funds”.
But what is “proof of funds” when buying a property? What documentation will estate agents and solicitors accept for this purpose?
Here at Stephanie Macnab Estate Agents we thought we’d shed some light on this and help buyers get ready to make progress with their offers…
What is “Proof of Funds” when buying a house?
When buying a property, proof of funds is a vital part of getting started.
An estate agent or solicitor will almost always request real evidence of the buyer’s financial capacity to pay the agreed price for a property before a sale can be formally agreed. It is certainly part of our due diligence process, in addition to obtaining proof of ID for anti-money laundering purposes.
Here are some of the most common types of proof of funds:
· Bank statements (usually dating back to the last month or earlier if possible). This will either be for the full cash amount or the deposit
· A mortgage ‘agreement in principle’ or ‘decision in principle’ which – added to the deposit – will equal 100% of the agreed sale price. Note these are abbreviated to AIP and DIP
· Your accounts (if you are self-employed or run your own business)
· Evidence that you have recently been given sufficient funds as a gift or through probate
· Evidence of an ongoing property sale that covers the required amount (and when the transaction will definitively complete) this will include a copy of the Memorandum of Sale from the buyers estate agent
· Proof of finance source (particularly if you’re an overseas buyer)
· Proof of dividends received, or the sale of shares
· Official information regarding a pension pay-out
· Documentation evidencing a cash prize or lottery win
· Buyers should also be able to demonstrate that they can cover other expenses such as Stamp Duty Land Tax (SDLT), legal and other fees
The various kinds of evidence listed above may each be acceptable on their own, or you may be asked to provide multiple documents.
When do you need to show Proof of Funds?
We would suggest buyers have proof of funds prepared before they make any type of offer on a property.
An estate agent won’t be able to accept an offer from you without a mortgage in principle or evidence that you have immediate access to the full amount of cash required upfront.
Should your offer get accepted, your solicitor will also need to see that you have the financial means to purchase the property.
Looking for further advice on buying a house or providing your Proof of Funds? Contact us today!