If real estate is about location, location, location, then the loan application process is about verification, verification, verification.
When a borrower applies for a loan, the lender will ask for several documents that verify the borrowers’ claims, such as the amount of assets they hold.
Learn more about proof of funds letter and other related documents that show the borrower’s ability to move forward in the process of buying a home.
Document proving available funds
A proof of funds document will demonstrate to the lender and seller that you have the money to buy a home. There’s no need to continue the home-buying process without this information. So, it’s something you’ll be asked early on.
There are some differences between a letter request from the lender and seller.
Sellers will likely want to see a preapproval letter, which is a statement from a lender that it already vetted and approved the applicant.
Lenders will want to look at bank statements as proof. They’ll check to see if your balances are high enough to cover the associated costs of buying a home. Borrowers must have legal clearance to any funding they submit for review.
Acceptable forms of proof of funds
Certainly, a bank statement is an acceptable way to verify the applicant’s funds.
The lender will also look for easy accessibility. While assets in a bank account will allow for a seamless transaction, other assets require additional steps. For instance, liquid assets like stocks or bonds can be readily turned to cash upon request.
Some requirements
When an applicant puts together a package to provide proof of funds, here are some of the needed documents:
- Bank information and address
- Account name
- Balance
- Copy of bank statement
- Bank authorization or signature
Timing considerations
The proof of funds letter is best when produced shortly before an offer is made.
Early in the application process, borrowers can reach out to their banks to ask how long it would take to gather the necessary information and verification. It’ll be good to know as the borrower works through the process of buying a home.
Timing will be different for a preapproval letter. Get it as soon as possible. A preapproval letter sets you apart from the crowd because it’s a confirmation from a lender that you are a qualified buyer. In today’s market, that’s indispensable.