Quick Answer
Proof of funds (POF) is a document that shows a buyer has the cash available to close a purchase. It is usually a recent bank or brokerage statement, or a letter from a bank. Sellers and wholesalers often ask for it before they accept a cash offer.
What Is Proof of Funds (POF)?
Proof of funds is evidence that you have enough liquid money to complete a purchase. In cash deals, it replaces the mortgage pre-approval letter a retail buyer would show. It tells the seller you can actually close.
POF is standard in off-market and investor deals. The seller is often turning down other offers and agreeing to a short timeline, so they want to know the buyer is real.
What Counts as Proof of Funds
- Bank statement: recent, usually within 30 to 60 days, showing the account holder's name and an available balance that covers the purchase.
- Brokerage or money market statement: acceptable when the funds are liquid and can be moved before closing.
- Bank letter: a letter on bank letterhead, signed by a bank officer, confirming the available balance.
- Lender letter: a hard money or private lender commitment for that specific property. Some sellers accept these; others want cash only.
You can black out account numbers. Keep the name, institution, date, and balance visible.
How Much Proof You Need
Your POF should cover the purchase price plus estimated closing costs. If a lender is funding part of the deal, your POF should cover your down payment and costs, with the lender letter covering the rest.
Example: Your offer is $135,000 and you estimate $4,000 in closing costs. Your POF should show at least $139,000 in available funds. Many investors show a cushion above that.
Mistakes to Avoid
- Never use a fake or edited POF. Altering a bank statement can be fraud and will end your reputation with sellers and title companies.
- Do not send full account numbers or login details. A redacted statement or bank letter is enough.
- Match the names. The name on the POF should match the buyer on the contract, or you should explain the link, such as an LLC and its member.
- Keep it current. Update your POF for each deal. An old statement is weak proof.
Frequently Asked Questions
What is proof of funds in real estate?
Proof of funds is a document, such as a recent bank statement or a bank letter, showing a buyer has enough liquid money to close. It is used with cash offers in place of a mortgage pre-approval.
How recent does proof of funds need to be?
Most sellers and title companies want a statement or letter from the last 30 to 60 days. Ask what the seller will accept before you submit your offer.
Can a hard money loan letter be used as proof of funds?
Sometimes. Some sellers accept a lender commitment letter for the specific property, while others want proof of cash. Clarify this before you make an offer.
Why do wholesalers ask for proof of funds?
Wholesalers ask for proof of funds to confirm a buyer can close before they commit a deal to them. A buyer who cannot close can cost them the contract with the seller.
Related Terms & Guides
- After Repair Value (ARV): What a property is worth once it is fixed up
- Assignment of Contract: How wholesalers transfer a contract to an end buyer
- Double Closing: Buy and resell in two separate closings
- Off-Market Property: Deals that never hit the MLS
- Earnest Money Deposit (EMD): The good-faith deposit that secures a contract
- The 70% Rule: The quick formula for a maximum offer
- Transactional Funding: Short-term money for the first closing
- Pallas Investor Deals: Off-market properties in 13 states
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