Big congrats. You’re in the market to buy a new home. Here’s what you need to know about proof of funds and when you really need it.
What is proof of funds?
Proof of funds is some evidence, ideally in writing, that you can afford to buy the house or flat you’ve got your eye on.
What proof is normally accepted?
These are usually fine, although there are no concrete rules:
* A mortgage offer in principle (or MIP) from your bank or building society.
* A bank statement showing you’ve saved the money up.
* A letter from someone, like your mum and dad, saying they’re helping you out. (This is sometimes known as a gifted deposit.)
Other things, such as cash from a previous house sale, proof of an inheritance or a pension drawdown, should be fine too.
It’s OK to have several proofs, such as your cash deposit and a mortgage offer in principle.
The truth about proof of funds
Let’s be completely honest. You DON’T need proof, at least in the initial stages of your house hunt.
You don’t need proof of funds to request a viewing of a house or flat.
You don’t need proof of funds to make an offer on it.
If an estate agent or a seller insists you must have proof of funds at this stage, be cautious. They aren’t being entirely truthful with you.
And if they insist you use their preferred mortgage provider so you can get proof of funds from them, this is a big red flag.
It could be something known as conditional selling. Many people consider it unethical, and good estate agents avoid it.
It’s something that good estate agents will never do.
You WILL need proof of funds – sometimes known as a source of funds – and ID once your offer is accepted and the sale begins.
The estate agent and your conveyancer will need this as part of the anti-money laundering (AML) checks they are required to carry out by law.
Proof of funds is never a bad idea.
Being able to show that you have the dosh ready and waiting to buy gives you a strong hand in the market.
It shows you’re serious about buying. And it makes you more attractive to sellers.
A seller could well prefer your offer to that of other buyers who don’t yet have proof.
And that can be a big, big tick against your name.
Especially if several people are interested in your dream home.
So, there are advantages to having proof of funds when you’re looking to buy. But it certainly isn’t mandatory.
If you’re buying, you’re more than welcome to look at what we have on our books, even if you don’t have proof of funds yet.
If you’re thinking of selling, feel free to call us for an initial chat. We’ll help you find the best buyer for your home, whoever they might be.
