Avoid common mistakes with proof of funds when buying a home—such as submitting outdated documents, using inaccessible assets, mishandling gift money, altering statements, or misrepresenting your finances. Sellers rely on valid proof of funds to assess your ability to close, so presenting clear, recent, and liquid documentation is essential. This guide outlines five critical mistakes to avoid with proof of funds and how to prepare them correctly for a successful offer.
What Is Proof of Funds—and Why It Matters
Proof of Funds (POF) is documentation that shows you have sufficient liquid assets to cover the costs of a real estate transaction. That includes:
- The down payment (typically 3%–20% of the home’s value)
- Any associated closing costs (usually 2%–5%)
- Full purchase amount for cash deals
Examples of valid POF:
- Bank statements (savings/checking)
- Investment account summaries (liquid funds)
- Certified letters from financial institutions
- Escrow or settlement account verifications
POF is typically required when:
- Submitting a purchase offer
- Working with a mortgage lender
- Competing with multiple buyers
Mistake 1: Submitting Incomplete or Outdated Documents
One of the most common—and avoidable—mistakes is sharing old or partial statements.
What This Looks Like:
- Screenshots of balances without transaction history
- A one-page summary without your name or account number
- Bank statements older than 30 days
The Fix:
- Share full, official bank statements—not just screenshots
- Make sure your name, bank, and balance are clearly visible
- Use statements no more than 30 days old—ideally under 10 days
Example:
John, a first-time homebuyer, submitted a screenshot of his mobile banking app showing $45,000. It lacked his name and account number. The seller rejected the offer due to unverifiable funds.
Mistake 2: Listing Unavailable or Restricted Funds
Having money isn’t enough—it must be liquid and accessible for use in a real estate transaction.
Common Pitfalls:
- Retirement accounts with early withdrawal penalties
- Funds in foreign bank accounts with transfer delays
- Non-cash investments like CDs or real estate equity
The Fix:
- Stick to liquid funds: checking, savings, or money market accounts
- If using brokerage accounts, verify the cash can be accessed quickly
- Convert restricted assets to liquid form before submitting POF
Numerical Comparison:
Account Type |
Accessible Within 5 Days? |
Good for POF? |
| Checking Account | ✅ Yes | ✅ Yes |
| 401(k) Retirement Fund | ❌ No | ❌ No |
| Stock Brokerage (Cash) | ✅ Yes (if liquidated) | ✅ Yes |
| Equity in a Property | ❌ No | ❌ No |
Mistake 3: Mishandling Gift Funds
If someone—like a family member—is helping you with your down payment, that’s completely fine. But improper documentation can raise red flags with underwriters and sellers alike.
What to Avoid:
- Depositing large sums without explanation
- Failing to disclose the relationship with the gift giver
- No paper trail of where the money came from
The Fix:
- Provide a gift letter signed by the donor stating the amount and that it’s not a loan
- Include a copy of the donor’s bank statement
- Show proof of transfer into your account
Gift Letter Template Includes:
- Name and address of the donor
- Relationship to the buyer
- Amount and date of the gift
- Statement confirming it’s not expected to be repaid
Mistake 4: Altering or Cropping Documents
In an effort to “tidy up” a document or protect sensitive info, some buyers submit cropped or edited PDFs. This is a red flag for fraud and often leads to instant rejection of your offer.
Examples:
- Removing account numbers
- Editing balances
- Sending partial screenshots
The Fix:
- Download unmodified PDFs directly from your bank
- If you must redact personal info, note it clearly and professionally
- Submit entire statements, even if some pages are blank
Note: Most real estate professionals now use software that automatically flags altered documents. Keep it clean and transparent.
Mistake 5: Overstating or Understating Your Funds
Some buyers believe they need to “look richer” to compete. Others downplay their assets to qualify for better loan terms. Either strategy can backfire when the numbers don’t add up.
Risky Scenarios:
- Claiming to be a cash buyer without showing the full amount
- Submitting funds for only the down payment when full coverage is needed
- Mixing personal and business funds without explanation
The Fix:
- Match your POF to the type of offer (cash or financed)
- Be clear about what portion covers down payment, closing, or reserves
- Include pre-approval letters alongside POF for clarity
Conclusion
Proof of funds isn’t just a technicality—it’s your credibility in the eyes of sellers, agents, and lenders. Whether you’re putting in an offer tomorrow or planning months ahead, take the time to get this right.