A proof of funds (POF) letter is documentation of a person or corporate entity’s current financial resources that validates the ability of that individual to satisfy a monetary demand.
A POF letter is issued by a verifiable authority, such as a bank or other financial institution, to certify that a claimant does indeed have money that is at or above a certain threshold. In this manner, a person’s current financial standing can be validated with a POF letter, as only liquid assets, such as cash, are shown on it. By providing a POF letter when requested, a person who wishes to provide money for some purpose can prove to any interested party that the money to do so exists and is accessible.
A proof of funds letter is alternatively referred to as a POF letter or simply as a POF.
Where Might it be Required?
A POF letter is needed when some party needs verification that a sum of money exists and is readily available to satisfy a financial need.
The most common instances in which a POF letter is requested are:
When buying property
A seller of real property is highly likely to request proof of funds from a prospective buyer. A confirmation that the buyer readily possesses the money to buy the property satisfies the seller’s concern that the buyer is serious and can meet the property’s down payment and closing fees. In this manner, the seller can identify viable buyers and know when to take the property off the market.
A POF letter is not always requested when buying a home, mainly when the home is not being sold through a real estate agent. This, however, is not always the case.
For immigration purposes
POF may be requested when undergoing an immigration process to another country. Here, a POF letter will assure the immigration authority of the other country that the prospective immigrant has enough financial resources to support themselves and cover living expenses.
EXAMPLE
The Government of Canada makes it an explicit requirement for visa applicants to demonstrate that they can support themselves and their families when applying under some immigration plans.
Therefore, the applicant must possess a sum of money that must not be a loan and can be used for living expenses.
TIP
A preapproval letter does not serve the same function as a proof of funds. A preapproval letter shows that a money lending institution has approved the buyer and agreed to provide a loan to cover outstanding expenses. A preapproval letter is typically supplied along with a POF letter; the letter certifies that the down payment and closing fees can be covered, while the preapproval letter assures the rest of the payment.
What are the requirements for a Proof of Funds Letter?
A POF letter must contain some information to serve its function. Since a POF letter is an official document issued by a financial institution, it typically follows a pattern from which the following can be distinguished:
- the bank’s name and address displayed on the letterhead
- an official statement about the purpose of the letter
- the name of the user for whom the letter is issued
- copy of the money market statement and balance
- bank-certified financial statement
- copy of an online banking statement
- a balance of funds in a checking or savings account
- the signature of an authorized bank employee.
How Does a Proof of Funds Letter Look?
The format of a POF letter is dependent upon the in-house practice of the issuing facility. While some might have additional sections on their issued letters, they all contain the information listed above in some format. POF letters are usually written on the official letterhead of the issuing institution.
Proof of Funds Letter Template
[Your Name or Institution’s Name]
[Your Address or Institution’s Address]
[City, State, Zip Code]
[Phone Number]
[Email Address]
[Date]
[Recipient’s Name]
[Recipient’s Title/Position, if applicable]
[Recipient’s Address]
[City, State, Zip Code]
Subject: Proof of Funds Letter for [Applicant’s Full Name]
Dear [Recipient’s Name],
I/We am/are writing on behalf of [Applicant’s Full Name], with their permission, to provide a formal proof of funds statement. This letter serves to verify that [Applicant’s Full Name] has the necessary financial resources available as required for [purpose of the funds – e.g., purchasing property, investment, tuition, etc.].
As of [date], [Applicant’s Full Name] holds a total balance of [amount in words], ([amount in figures]), across [his/her/their] account(s) with [Your Name or Institution’s Name]. These funds are fully available and can be accessed without any legal encumbrance or condition that may impede the purpose for which they are intended.
Please find below the details of the account(s) holding the aforementioned funds:
- Account Name: [Account Holder’s Name]
- Account Number: [Account Number]
- Type of Account: [Checking/Savings/Other]
- Current Balance: [Amount in figures and words]
- Bank Name: [Bank Name]
- Bank Address: [Bank Address]
This letter does not constitute a commitment to lend or an offer of credit from [Your Name or Institution’s Name] but is a statement of the current balance held by [Applicant’s Full Name] as of the date noted above.
Should you require any further verification or information regarding this matter, please do not hesitate to contact me/us at [Phone Number] or [Email Address].
Thank you for your attention to this matter.
Sincerely,
[Your Signature, if sending via mail]
[Your Name]
[Your Title/Position, if applicable]
[Your Institution’s Name, if applicable]
Sample Letter
Subject: Proof of Funds Letter for Amber Johnson
Dear Ms. Roberts,
I am writing on behalf of Amber Johnson, with her full consent, to provide a formal proof of funds statement. This letter serves to confirm that Emily Johnson has the necessary financial resources available for purchasing property, as required by your organization.
As of February 12, 20XX, Amber Johnson holds a total balance of eighty-five thousand dollars ($85,000) across her accounts with Global Finance Bank. These funds are fully available and can be immediately accessed without any legal encumbrance or condition that would impede their intended purpose for purchasing property.
Please find the details of the account(s) holding the aforementioned funds below:
- Account Name: Amber Johnson
- Account Number: 987654321
- Type of Account: Savings
- Current Balance: $85,000
- Bank Name: Global Finance Bank
- Bank Address: 123 Capital Avenue, Finance City, NY, 10001
This letter does not constitute a commitment to lend or an offer of credit from Global Finance Bank but is a verification of the current balance held by Amber Johnson as of the date noted above.
Should you require any further verification or information regarding this matter, please do not hesitate to contact me at 555-678-9012 or via email at support@globalfinancebank.com.
Thank you for your attention to this matter.
Sincerely,
John Doe
Customer Support Manager
Global Finance Bank
Analysis
This proof of funds letter is an effective sample because it clearly and concisely conveys essential information required by organizations to verify an individual’s financial capability to make significant purchases, such as property. It begins with a formal introduction that specifies the purpose of the letter and identifies both the subject (Amber Johnson) and the recipient (Ms. Roberts), establishing the context right away.
The letter provides a specific statement of financial capability, mentioning the exact amount available ($85,000), thus eliminating any ambiguity about the funds’ sufficiency. It also reassures the recipient about the availability and accessibility of these funds, addressing potential concerns about legal encumbrances or conditions that could affect the transaction.
Detailing the account information, including the account name, number, type, and current balance, along with the bank’s contact information, adds to the letter’s credibility by offering all necessary details for verification in one concise document. This comprehensive approach facilitates the recipient’s process of confirming the stated funds, enhancing the efficiency of the verification process.
The letter also clarifies the nature of the document as a verification of funds rather than a commitment to lend, setting clear expectations. It concludes with an offer for further assistance, providing contact details for follow-up, which demonstrates a professional and cooperative attitude towards the recipient’s potential needs for additional information or clarification.
How to Obtain This Letter
A proof of letter is issued by a bank or some other financial institution and can be obtained by request from the appropriate facility. Depending on the institution’s policy, an email or phone call may suffice, while some may need to submit a formal request or a physical appearance. The POF letter should be prepared and issued within a week, often within a day or two.
Proof of Funds V/S Proof of Deposit
POF certifies that a buyer has enough money to complete a purchase, while proof of deposit shows how much a buyer has in an account and further details how the money was obtained. Mortgage lenders usually request proof of deposit to see how much money a borrower has to cover the down payment and closing fees of the purchase, as well as the source of the funds. Knowing the source of a borrower’s funds allows a lender to determine if the borrower will be able to repay. If the source is steady and reliable, such as a stable job, the lender might be more inclined to approve the borrower than if the source is a one-time monetary gift.
Beware of the Scams
POF documents contain sensitive information about a person’s finances and should not be made available to just anyone. A person can become the target of criminals who falsely request POF letters to view such information. Therefore, thoroughly investigate a person before supplying a POF letter to them.
A POF letter can also be used to attempt a scam, primarily investment-related scams. Victims of this type of scam are tricked into depositing sums of money to fuel a non-existent investment. The scam shows the victim a false POF letter claiming that there is money available to invest in the business.
Key Takeaways
- A proof of funds letter allows a person to validate their financial standing when required to cover some expenses.
- This letter is essential when making large purchases of real property.
- A bank or other financial institution issues a POF letter.
- It is an official document and should appear on official stationery.
- It contains sensitive information and should always be kept secure.
- Contact the supposed issuing bank or the authorities if you receive a suspicious POF letter.
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