Monday, September 14, 2015

Why would a seller ask for a proof of funds letter if the buyer is getting a mortgage?

One of the first steps in the home buying process is obtaining a mortgage pre-approval.  This is usually done right after or about the same time as one chooses a real estate agent to serve as their agent throughout the entire purchase process.

Key point:  It is important for buyers to remember the listing real estate agent works for the seller.  Also, it costs nothing to have your own real estate agent represent you.

The home purchase process usually involves making an offer to purchase with a small amount of money offered as earnest money to show the seller that the buyer is serious.  This escrow money will go toward the purchase and is refundable if the property fails an inspection or financing falls through.

It is common practice to provide a copy of the mortgage pre-approval letter at the time of offer. Sellers want to know a prospective buyer has the ability to complete the purchase.

If the offer is a cash offer then the prospective buyer should expect to provide a letter documenting available funds to complete the purchase.   This proof of funds letter should come from a bank, investment company or similar institution and simply state the buyer has sufficient funds available for the purchase. 

Sometimes, if the offer includes a significant down payment, the seller may request proof of funds for the down payment amount.  While I have never had a seller ask for a proof of funds letter for the down payment I can understand if it gets requested.  I do believe the lender a buyer is using for their mortgage may influence whether a letter is requested.  My experience has been most sellers are more comfortable with a local brick and mortar lender and less comfortable with Internet only lenders.

If you are considering a home purchase in Brevard County, Florida and would like some local lender contacts, please email me for a list of lenders.   While I usually do not recommended specific lenders I can tell you who past clients have successfully used in the past including Michael Smith with Movement Mortgage in Melbourne, FL.

Here are a few related articles about the home buying process.
Have a question about the home buying process in Florida?  Give me a call at 32-693-3850 or send me an email.

Ready to sell your Melbourne or Viera, Florida home, I can help as well.  Ask for your free no obligation market analysis!