When you’re buying a house for cash you’ll be asked to show proof of funds, in order to make sure you can pay for the home, and there are some specific ways that agents want you to do that. Your proof of funds is very important, because it can affect whether you’re able to get under contract on the house you really love. Talk to your agent and be up front about how you plan to pay for the home. Then you can get information from them that helps guide you toward the right way to show your proof of funds. When you do that, it will give you the opportunity to provide the right proof the first time, so you can make your offer and send it to the seller in the hopes that it will be accepted.
Why do you need proof of funds?
You need proof of funds when you make a cash offer on a house, to show that you can actually purchase the home you want to buy. Just like most real estate agents won’t accept an offer on a home without a preapproval letter from the bank when you’re getting a mortgage, they generally won’t take a cash offer unless you can prove that you have the cash. Essentially, that serves the same purpose as the preapproval letter and indicates that you’ll be likely to honor your offer and complete the purchase of the house. The seller will be more likely to accept your offer if you have proof of funds, as well, so that means you have a higher chance of getting the house.
What kinds of sales require this proof?
If you’re buying a home and getting a mortgage, you don’t need to provide proof of funds. You’ll just need to put down your earnest money and give your agent your preapproval letter. Then the offer will go to the seller and the negotiation can begin. The only kind of sale that generally requires proof of funds is a cash sale. Because you won’t be getting a mortgage, you need to make sure that the seller knows you have the money to buy the house. In many cases, your agent may not even be willing to present your offer if you won’t provide proof of funds for a cash sale.
Can you bring in your bank statements?
Before you make a cash offer, be sure you talk to your agent about how they need to see proof of funds and how soon they will need that proof, so you don’t end up losing a home you really want due to a paperwork problem. You generally can’t just come in with your bank statement from last month, showing that you have the money. There’s no proof that the money is still in the bank as of the day you bring in the letter. You might have spent all or part of it since your last statement, so your agent won’t likely accept that. Instead, you can get a printout from your bank on its letterhead, dated that day, that shows your current balance. By doing that, you’re showing that the money is available to you on the day you make your offer.
What if the money is in another type of account?
The money you plan on using to buy your house may be in another type of account, such as savings, or an investment. If the investment is something you can cash out quickly, a statement with the current date and the amount and letterhead, just like you would need from your bank, may be sufficient. If the money is in an account that takes time to pull funds from, you may need to move those funds before making your offer. Your real estate agent can give you that information, and it’s important to ask about that before you find a house to buy, if you think you may need to move money around. Since that can take some time, you don’t want to be caught without a good proof of funds when the perfect house shows up.
Can you pay in actual cash?
When you’re purchasing a house in cash and providing proof of funds, you’re not actually paying in cash. In other words, you won’t need to bring a briefcase full of money to the closing table. A cash sale where proof of funds is required simply means that you’re using your own funds to purchase the property, and that you won’t be getting a mortgage to help you pay for the home. For the actual closing, you’ll need to bring a cashier’s check to closing, which you can get from your bank on the closing day. The title company that’s doing the closing will call you with the exact amount you need to bring in, allowing you to go and get the check before you come in to sign the papers. You don’t usually need to show any proof of funds throughout the sales process, as long as you’ve done so properly at the beginning of the transaction when you first make the offer.
2 Point Highlight
When you’re buying a house for cash you’ll be asked to show proof of funds, in order to make sure you can pay for the home, and there are some specific ways that agents want you to do that.
Before you make a cash offer, be sure you talk to your agent about how they need to see proof of funds and how soon they will need that proof, so you don’t end up losing a home you really want due to a paperwork problem.
