All you need to do about the proof of funds before buying a house

All you need to do about the proof of funds before buying a house

Buying a house in the UK involves a number of steps. You may apply for a mortgage or make a direct cash payment for your purchase. However, auctioneers, solicitors, and real estate agents will ask you to submit some documents before finalising the deal. The proof of funds is one of the major documents needed for buying a property in London. Without proper documentation, you cannot close the deal. Thus, what should you choose as your proof of funds? Why do you need it for the property deal? A brief discussion will remove your confusion.

When does a solicitor check proof of funds?

During the documentation process, buyers have the responsibility to show strong proof of their source of funds. Before buying the property, you need to provide this proof to the solicitor and estate agent. You can also look for a proof of funds provider to get assistance with financial requisites.

The solicitor is responsible for managing the legal activities on your behalf. He needs the POF to ensure the property deal is closed lawfully and successfully.

Why do realtors ask you for POF?

There are some reasons why you need proof of funds when buying a house.

Some real estate agents work only for sellers, and it is their responsibility to promote the property to be sold. They look for the best buyer, who can purchase the real estate at the most profitable rate. It is the major reason for asking you to show POF. Your evidence will make them understand that you can afford the house for sale.

Bank statements or proof of your investments (like shares and bonds) can be shown to the agent.

Another reason for requesting you to show the POF is related to regulatory requirements. As the 5th Money Laundering Directive in the EU has become active, several realty agents have thought of obtaining POF from the potential buyer. Their intention is to ensure that you will be able to buy the property efficiently without any financial issues. Moreover, POF shows that you have not chosen any illegal way to acquire the money.

POF is different from a source of funds

These terms have different implications. However, real estate agents will ask you to show both. POF is intended to prove that you have the amount needed to buy a property. It may be a bank statement, mortgage agreement copy, and any other documents.

On the contrary, the source of funds shows how you have received the money. In this case also, a bank statement is essential to prove that the money is saved over a period. For instance, someone has gifted that amount for your needs. Thus, you need to submit the letter received from that person.

A POF is of different types, including

Savings

You have saved an amount from your monthly earnings like pension, salary, and annuity. The most important thing is that your bank statements should not be more than 6 months older. They have to show how your employer has paid you, and your savings account has grown slowly.

In case of more than one savings bank account, you need to provide statements for all of them.

Sale of shares-

You may have sold a share of a company, and so, you have received a relevant copy. It is also essential to submit a copy of the current bank statement to show that you have received the money from a company.

Pension release-

Copies of bank account statements and pension statements have to be submitted as proof of funds UK.

Sale of a property

While selling a house, your solicitor has provided a completion statement. You may choose its copy as the acceptable proof of funds to buy a property.

Inheritance-

You may have inherited the fund from others. In this case, it is essential to submit a copy of the executor’s letter that states the amount you have received.

Can you choose your gambling winnings as your POF?

You must show the receipt copy to prove your winnings. As the gambling agency has offered the money, the receipt will prove it. However, some gamblers receive cash as winnings, and in that case, it is not easy to show the source of funds.

It is to be noted that mortgage providers do not easily provide loans to regular gamblers. They think that gamblers are high-risk borrowers, and thus, they can reject their loan applications.

Cash buyers and their evidence of funds-

The money needed for buying the property is at your disposal, and you like to pay for the deal in cash. Still, your real estate agent will ask you to show proof of the availability of the fund. He may also enquire you of the source of this money.

A reliable estate agent knows that it is his liability to check the buyer’s source of funds. In fact, it is a step toward preventing money-laundering cases in the country. Similarly, as a buyer, you can prove your financial status that is strong enough to buy a property.

Foreign transfer of funds-

You might have received money from someone residing in a different country. You like to use the amount for buying a house. However, in this scenario, there is a chance of facing issues with money-laundering rules. Your solicitor may reject your funds especially when money comes for high-risk countries. Some countries that are not classified as the high-risk ones are France, USA, Sweden, New Zealand, Japan, Greece, Germany, Portugal, and Spain. Funds received from other countries may not be acceptable.

You can now make your POF ready to purchase a house in the UK. Still, to remove any confusion, you can visit the site TRPE. It is a reliable website with guidance and comprehensive information for buyers, property sellers, and estate agents. You will also get help for proper appraisal in London. Professionals have the best knowledge to assist you in the buying and selling process. You will be free from conflict.