Proof of Funds

Proof of funds (POF) is a document that demonstrates how much money a person or entity has available. When purchasing a home, you may need a POF to show the seller that you can cover the purchase costs of a home. Remember that purchase costs can include the down payment, escrow and closing costs.

What Funds Qualify As POF?

There are several types of documents that qualify as proof of funds. In some transactions, a simple printed bank statement can qualify. Additionally, a certified financial statement or a copy of a money market account balance may qualify. Other times, you will need a letter from your bank or financial institution that states the exact amount of accessible or liquid funds that you have available.

It’s important to note that your funds must be liquid to qualify. This means that mutual funds, life insurance, another person’s bank account, shares, bonds or proof of other possessions do not qualify as POF.

How Is a Proof of Funds Letter Different from A Pre-Approval Letter?

A Pre-Approval Letter and a proof of funds letter are not the same. A pre-approval letter is a document stating that a lender will provide a buyer with a loan. In contrast, a POF letter states that a buyer has funds available to pay for the costs associated with the purchase of a home.

Pre-Approval Letter

A mortgage pre-approval letter lets sellers know that you will be able to afford the home. While someone may be preapproved for a loan, it doesn’t mean that they get a loan right away.
The first step to getting approved for a mortgage is to get prequalified for a loan. This means that a lender has given an estimate for how much a buyer could be approved for based on their credit score. This number is called a gross estimate.
The next step is for the buyer to get preapproved. They provide more information, such as a bank statement and pay stubs, and the lender will do a hard credit check to investigate the buyer’s debt and credit scenario.

POF Letter

Sellers will ask for POF in addition to a preapproval or prequalification when they want to see evidence that a buyer has enough money to cover closing costs and their down payment. Sellers may also require a POF even if a bank or lender does not require it to approve you for a mortgage. So, keep in mind that it’s a good idea to have a POF no matter what.

Other Documents Qualify As POF

Several document types qualify as POF. Proof of funds usually comes in the form of a bank security or custody statement. These can be procured from the bank or the financial institution that holds client’s money. Bank statements are the most common document to use as POF.

READY, WILLING AND ABLE (RWA) LETTER
Ready willing and able (RWA) is a Fin MT799 pre advice letter issued by the bank or a financial institution to convey that both parties i.e., “Issuing Bank and the Applicant” are willing to involve in a specific financial transaction and it is a sign of proceedings.

Ready Willing and Able (RWA) is a drafted document issued by the Banks or financial institutions on behalf of its clients, showing intent and ability both financially and legally to enter into a financial transaction. These letters issued to our clients, usually via MT799 message.

“My Rupee Mantra” experts advise you in preparing or getting Proof of Funds or Pre-Approval Advices from the Bank. The experts find the best suited Bank for the client for issuance of POF / PAA attractive terms and conditions.