One major short sale concern of the bank is investing the time and effort in arranging a short sale then having the buyer not close on the short sale. Due to this possibility you can expect the bank to ask for a “Proof of Funds Letter” or a “Mortgage Commitment Letter” as a needed part of the short sale package.
This request is often a major hindrance for investors that are flipping the deal with what is regarded as a double closing or simultaneous closing. What are yourr options?
Here are a few possible (remedies|solutions} for the needed proof of funds letter:
-Bank Statement. If you have the funds available send the bank a recent bank statement as your “proof of funds letter”.
-Obtain a Proof of Funds Letter. This letter can be acquired from your bank, mortgage broker, non-public hard funds provider, or anyone which has the power to provide transaction funding.
-Mortgage Commitment Letter. I am not a fan of the Mortgage Commitment Letter because a bank issues a loan commitment after it has approved both the house and you. The home appraisal must meet the bank’s rules and the bank may need the real estate be in a better condition then the current state of the property. For that I feel a commitment letter is better suited for purchasing houses that don’t involve a short sale.
-Home Equity line ( HELOC ). If you have available equity in a property a HELOC on the home can serve you well. First, there is no charges on most HELOC for unused lines of credit. Second, it meets the banks suggestions for proof of funds letter even if these are not the funds you intend on closing with.
The bottom line is unless you have a longtime relationship with the bank it’s likely you will have to show evidence of funds in some manner. If you are new with some resources, find a good hard funds provider to work with and they can supply the proof of funds letter you need.