A proof of funds letter may be required before completing a transaction. This is common both when purchasing an asset with cash or through bank financing.
In this article, we’re explaining proof of funds letters, sharing the specific requirements that they typically need to meet, and answering common questions.
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Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- Proof of Funds Letter
- How Do I Write a Proof of Fund Letter?
- Reasons You Need a Letter of Proof of Funds
- Frequently Asked Questions
- Do You Want Help Opening Bank Accounts?
Proof of Funds Letter
Proof of funds letter may refer to a formal document issued by a bank or an informal document like an online bank statement. With this in mind, it’s important to confirm the specific requirements of a proof of funds letter before obtaining one, to ensure that the document meets the situation’s requirements.
How Do I Write a Proof of Fund Letter?
How you write a proof of funds letter will depend on the specific requirements of the transaction and the currency you’re using, whether it’s CHF currency, the US Dollar, or another type of currency. For example, different scenarios may require a different type of document. In certain instances, a bank statement printed from online banking may be sufficient. However, in other cases, a signed and dated letter from a branch manager may be required.
With this in mind, it is important to confirm the specific requirements for a proof of funds letter before you request one from the bank. Doing so will ensure that you do not need to get a second proof of funds letter.
That said, if you are required to provide a proof of funds, you will typically need to ensure that your proof of funds letter includes the following information:
- Name of financial institution
- Address of financial institution
- Account holder’s name
- Account number
- Bank representative’s name
- Bank representative’s daytime contact information
- Total balance of the funds in the account being used
However, it’s important to note that a preapproval letter may also suffice if a transaction is not being completed in cash. In other words, if a person requires bank financing to complete a purchase. With this in mind, here is a more detailed look at a preapproval letter.
Preapproval Letter
A pre-approval letter is similar to a proof of funds letter as it demonstrates that an individual has access to sufficient funds to purchase a home. In doing so, the individual is able to demonstrate their ability to meet the financial requirements of a transaction. Preapproval letters are common when purchasing a home through a mortgage, showing that the borrower has access to the required capital.
Reasons You Need a Letter of Proof of Funds
Reasons you need a letter of proof of funds will vary depending on the specific situation, jurisdiction, and transaction. In fact, in many instances, it is not required. However, when it is required, it is often to demonstrate that one party in the transaction is capable of meeting their financial commitments.
This is an important consideration, especially for the party selling the asset. Otherwise, a lot of time can be lost while the parties engage in negotiations, due diligence, and agreeing to terms only to find that the prospective buyer is unable to meet the commitment.
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Frequently Asked Questions
Below are three of the most common questions we receive from people looking into what a proof of funds letter is. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
What Is a Proof of Funds Letter for a Cash Offer?
Proof of funds letter for a cash offer is a document like a bank statement, a letter issued by a bank, or statement from a certified accountant that shows an individual has the financial means to make a cash purchase for an asset, usually a property. When making a cash offer, a proof of funds letter may be requested to accept the offer. This is a way that the seller of an asset can ensure the individual planning to purchase the property has the financial means to complete the transaction without any delays.
Can I Verify a Proof of Funds Letter?
Yes, you can verify a proof of funds letter if the information on the letter is signed by a specific person and the contact information is provided. Importantly, whenever this is provided directly by a bank, a contact person will be included in the document. So, if this information is not provided, you can ask the person providing the letter to request a new letter with the necessary details.
What Is an Example of Proof of Funds From a Bank?
An example of proof of funds from a bank can include a printed document on official bank letterhead confirming the current account balance as of a specific date. Alternatively, depending on the reason for requesting proof of funds, a bank statement may also be considered sufficient proof.
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