Proof of funds with private money lenders

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Proof of funds with private money lenders

David Weis
Rehabber · Lutz, FL · Member since 2012 · 26 posts · 13 votes

For those investors here that use private money, how do you show proof of funds when submitting an offer? Do you have your private money folks give you the money first and use that as your proof of funds. Or do you send a letter with your offer stating that your private money person will be funding the deal and then having the private money person submit their own proof of funds?

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  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    12y

    If you can swing it, whenever possible the best thing for you is to already have the cash in a bank account with your name on it. For highly competitive bank owned houses a cash offer is what you want to have. An offer based on financing will not be taken as seriously as cash.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    You'd be getting a preapproval, for a financed offer, not a POF. POF is evidence of the cash, in the buyer's name/account.

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  • Stephanie MedellinBusiness Member
    Mortgage Broker · CA · Member since 2014 · 1k+ posts · 644 votes
    12y

    Wayne Brooks is 100% right. If you are getting a loan from a private money lender, you are financing, not paying cash. Proof of funds is only used to show cash in the bank.

    A private money lender should issue you a preapproval letter stating you are preapproved to borrow $xxx,xxx.xx which you would submit with your offer along with proof of your own funds in the bank that will be used for your down payment (assuming you're contributing a portion of your own money).

    When the lender makes a private money loan, they will typically "fund" the loan into an escrow account or trust account (however it's done in your state) after all loan conditions are met, and it will go directly to the seller.

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