Before a sale can be marked as agreed, your estate agent and conveyancer need evidence that the money to complete your purchase is genuinely in place, and, separately, evidence of where it came from. This isn't a formality. It's a legal requirement that applies to every buyer, mortgaged or cash.
What actually counts as proof of funds?
Proof of funds is the evidence you provide showing you can complete your purchase. If you're buying with a mortgage, this is typically your Agreement in Principle, a written indication from a lender of what they'd provisionally lend you. If you're a cash buyer, it's recent bank or savings statements showing the full amount available. Your estate agent will want this before formally marking a sale as agreed, and your conveyancer will run a separate, more detailed check on where the money actually came from.
Why does proof of funds matter so much?
Estate agents are legally required to verify that the money behind a purchase comes from a legitimate source before a sale progresses. Under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, an estate agent is treated as entering a formal business relationship with a buyer from the moment their offer is accepted, which is when these checks begin in earnest. Beyond the legal requirement, providing this evidence quickly builds confidence with the seller and avoids unnecessary delay right at the start of the transaction.
What happens behind the scenes?
Your estate agent checks your proof of funds before marking the property as Sold Subject to Contract. Your conveyancer then conducts a separate, more detailed check as part of their own anti-money laundering obligations, including reviewing the source of your deposit and, in some cases, asking for further documentation on how those funds built up over time. This is standard practice and applies to every buyer, not just those who seem unusual in some way.
What if my deposit isn't straightforward savings?
If any part of your deposit is a gift, proceeds from selling shares, or an inheritance, be ready to provide documentation showing where it actually came from, not just a letter confirming it was a gift. Source-of-funds checks are considered a core part of due diligence that firms are expected to carry out themselves rather than take on trust from another party, so having this evidence ready before it's requested is one of the more reliable ways to avoid early delay.
| If you're... | You'll typically need |
|---|---|
| Buying with a mortgage | A current Agreement in Principle, usually valid 30 to 90 days |
| A cash buyer | Bank or savings statements dated within the last three months |
| Using a gifted deposit | Evidence of where the gifted funds came from, not just confirmation it's a gift |
| Funding from an inheritance or share sale | Documentation showing the transaction that generated the funds |
Frequently asked questions
- What counts as proof of funds when buying a house?
- An Agreement in Principle for mortgage buyers, or recent bank and savings statements for cash buyers. Your conveyancer separately checks where the money came from.
- Why do I need to prove where my deposit came from?
- It's a legal requirement under the UK's Money Laundering Regulations, applying to every buyer, and incomplete documentation is a common cause of early delay.
- When does an estate agent ask for proof of funds?
- Typically before marking a sale as agreed, since the regulations treat the business relationship as starting from the point your offer is accepted.
- What if part of my deposit is a gift?
- You'll need documentation showing where the gifted money came from. The same applies to funds from a share sale or inheritance.
This guide is general information for home buyers in England and Wales, not legal or financial advice. Documentation requirements vary by firm and by the specifics of your funds, so confirm exactly what's needed with your own conveyancer or agent.