When does a solicitor check proof of funds?

What does proof of funds mean?

Proof of funds is exactly what it sounds like: proving that you have access to enough money to buy a property. This goes for cash buyers looking to buy a property outright, as well as people who are buying with a mortgage.

Providing proof of funds usually means showing your solicitor a bank statement that shows that you have the full purchase price in your account, or that you have enough for a deposit and a mortgage in principle from your mortgage provider. Exactly what you need to show can vary, but we’ll get into more detail about that later.

Who needs to see proof of funds?

There are a few different people that will likely ask for proof of funds throughout the buying process. The reason they need it can vary, but they’ll all need to see similar evidence:

• Your conveyancing solicitor - Your solicitor needs to see proof of funds for a range of legal reasons (we’ll go through these in more detail shortly).
• The estate agent - Estate agents have to follow all sorts of rules and codes of conduct when selling a home, including confirming the source and availability of funds.
• The seller’s solicitor - The seller’s solicitor will need to see proof of funds for all the same reasons that yours will. Your solicitor will usually provide this information on your behalf once you have sent it to them.
• Your mortgage provider - Proof of funds with mortgage providers is a little different to solicitors. If you’re planning to buy with a mortgage, you’ll need to show your mortgage provider you’re able to pay off your mortgage in the long term, rather than having immediate access to funds.
  

If you’re worried you might not get a mortgage, you can check out our blog ‘What stops you getting a mortgage’

Why does my solicitor need proof of funds?

Solicitors need to see proof of funds to make sure your money has come from a legitimate source. With such large amounts of money being moved around when buying a home, it can be an attractive prospect for money launderers, so solicitors need to make sure money  hasn’t come through criminal activity. Solicitors are legally required to make these checks, and they could be brought into  legal proceedings if they don’t  check your proof of funds properly.

What do I need to provide for proof of funds?

Proof of funds is based around two main factors: amount of funds and source of funds.

Amount of funds is pretty simple, as it’s just a case of showing that the amount of money that you have access to adds up to the purchase price of the property you want to buy.

Source of funds means providing direct evidence of where your money has come from. These are the main ways that you might have sourced your funds, and how to prove it:

• Savings - If you have accumulated the funds over time, you’ll need to provide bank statements from at least the last 6 months.
• Gifted funds - If you’ve received funds as a gift from a friend or family member, they’ll need to provide evidence of where they got the funds. They’ll also be asked for a signed declaration that the money’s a gift, and they’re not expecting a share in the property.
• Inheritance - Evidence from the executors of a will, and a bank statement to show the money coming into your account.
• Property sale - The solicitor handling the sale of your property should provide a status report that shows the progress of the sale and the likelihood of it going ahead.
• Pension - Bank statements and pension records showing the money coming into your account.
• Sale of shares/investments - Evidence of any shares being released, and a bank statement showing the money being received.
• Lottery/gambling/premium bonds win - Evidence of your win and proof you received the money.
• Release of dividends from a UK company - A copy of the dividend certificate, the company’s accounts, and a statement showing you received the money.
• Compensation or divorce settlement - Confirmation from a court to show your settlement amount.
  

If your funds are coming from outside of the UK, it’s worth talking to your solicitor about the rules on how it will be accepted. In most cases, money coming from within the EU, Iceland, Lichtenstein, Norway, and Switzerland tend to be accepted. Funds from countries outside of these areas may need to go through   more checks if they’re considered to be high risk countries, so it’s best to check with your solicitor just to make sure.

For more important questions when buying a house, check out our blog ‘10 questions to ask a mortgage advisor’

When does a solicitor check proof of funds?

Some estate agents might ask for proof of funds early on when you’re looking at properties, to check that you're serious about buying. You’re not actually obligated to provide proof at this point, though, and if you don’t have a mortgage in principle by this point it’s unlikely you’d be able to.

Solicitors will usually ask for proof of funds as soon as you have made an offer on a home. This is because the checks can take a while, and they’ll want to make sure the buying process can be as quick as possible. Any delays in providing your solicitor with proof of funds can slow down the buying process, so it’s a good idea to gather all relevant evidence and get a mortgage in principle from your mortgage provider before you make an offer.

For more information on the mortgage process, you can check out our blog ‘How long does a mortgage application take?’

A few final tips…

These are the last few things to remember about proof of funds:

• Providing proof of funds is about showing that you have enough money to buy a home, and that it came to you legally. It’s not a test, and your solicitor should be able to help you through the process.
• If your funds have come from a gift, it’s likely you’ll need to get a few people to sign letters declaring that they actually gave you the money.
• Your solicitor will probably ask you for proof of funds as soon as you make an offer on a property, so it helps to be as prepared as possible ahead of time.

Urban Jungle is not a financial advisor and information in this article should not be taken as advice or recommendation.