Key takeaways

  • A proof of funds letter, or POF letter, proves you have the funds on hand 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.
  • You can request a proof of funds letter in person at your bank or online. Your lender might be able to fill out a request form on your behalf instead.

What is a mortgage proof of funds (POF) letter?

A proof of funds letter is a document providing evidence you have enough liquid assets, or cash, to buy a home with a mortgage. You’ll need this paperwork to demonstrate to the lender and seller you can afford to purchase their home, including paying for the down payment and closing costs.

Likewise, if paying for the home in cash, you’ll need to provide proof of having access to enough money to cover the full cost of the home. Most sellers won’t take the home off the market before confirming the buyer has these funds set aside.

What types of funds qualify?

You can use many different types of funds to qualify for a mortgage, including:

  • Money in checking and savings accounts
  • Money from investment or retirement accounts (provided they are liquidated)
  • Gift funds or grants
  • Money from a bridge loan
  • Money from a pending sale

Regardless of where you source from, the funds need to be liquid. That means assets like mutual funds or life insurance, while they have value, might not qualify if they aren’t sufficiently liquidated.

Why homebuyers need a proof of funds letter

The purpose of a proof of funds letter is to prove that your offer to purchase a home is legitimate. Without a proof of funds letter, your offer might not even warrant consideration.

A proof of funds letter might also give you an advantage when making an offer on a home if you’re in a multiple-bid situation. If you can show you’re prepared with the funds (either for a down payment and closing costs or an all-cash deal), you might stand out over another buyer with fewer assets.

It might not be necessary to provide proof of funds if the home is for sale by owner and the seller isn’t working with a real estate agent, however. This scenario is the exception, not the rule.

Example proof of funds letter

Your bank can provide a proof of funds letter, or you can find sample letters like the one below:

Document
[DATE] [NAME OF BANK] [ADDRESS OF BANK] [EMAIL AND/OR PHONE NUMBER]

Dear [NAME],

This letter and enclosed financial statements are to certify that [NAME OF PERSON OR COMPANY] has been a client with our bank since [YEAR] and is in good standing.

[NAME OF PERSON or COMPANY] has a total combined balance of cash deposits with our bank of USD $______. We have attached copies of the statements for each of [NAME OF PERSON or COMPANY’S] accounts at our bank.

If you require any further information or have any questions, please do not hesitate to contact us directly at [EMAIL AND/OR PHONE NUMBER].

Sincerely,


[SIGNATURE] [NAME OF BANK REPRESENTATIVE] [TITLE]

How to get a proof of funds letter

While a simple bank statement often suffices as proof of funds, you might need to provide more context with an official letter from your bank. Sometimes, the lender has the borrower fill out a request form that is then forwarded to the bank. In other cases, you might need to request one yourself. Here’s how:

  1. Put your money in one account: If you’re using funds from multiple accounts or pulling from an investment account, consider moving them all to a single checking or savings account. If going this route, try to move all of the money at least two months’ ahead of getting preapproved for a mortgage and making offers on homes. This gives the funds time to “season.” Keep careful records, too: Your lender will want to see statements showing when the funds moved from one account to another.
  2. Submit a request to the bank: Depending on your bank, this process might be referred to as a “verification.” You typically have to make this request in person at a branch location or through a special form online. The bank often gets a document to you within a few days, and usually no more than one week.
  3. Provide the letter to the seller: As soon as you receive the proof of funds letter, pass copies along to your lender and the seller. As with all of the paperwork related to a real estate transaction, keep another copy of the letter in a safe spot.

Difference between a preapproval letter and a proof of funds letter

Unlike a proof of funds letter, a mortgage preapproval letter is a document from a mortgage lender showing a proposed loan amount for a given borrower. While a preapproval letter isn’t firm confirmation you have financing, it’s another necessary document to provide when making offers on homes.

Proof of funds letter FAQ

  • No. The seller might accept a bank statement as proof of funds, but if they want an official letter, you’ll need to get a separate document from your bank. You’ll still need copies of bank statements when you apply for a mortgage, however. These help the lender understand your income and past financial activity.
  • A proof of funds letter doesn’t necessarily expire, but it’ll need to be dated and accurately reflect the funds in your account within the time frame you plan to buy a home.
  • You can use funds from multiple sources to buy a home, but you’ll need separate letters from each institution to prove the balances exist.