If you’re planning to buy your first home, it’s never too early to start thinking about Source of Funds. Even before you begin house-hunting or speak to a mortgage adviser, making sure your finances are clear and traceable can save time and stress later — and may even help prevent you from missing out on your dream home.
This isn’t just relevant for first-time buyers either. The same applies whether you’re buying your second home or your tenth — clear, well-documented finances are essential for any successful property purchase.
What Is Source of Funds?
Source of Funds refers to where your deposit and purchase money comes from, not just confirmation that you have the funds available. For many buyers, this will be savings built up over time, a gifted deposit from parents or family members, or a combination of both. All of these are very common and perfectly acceptable — they simply need to be clear and easy to follow.
Why We Ask Early
Property purchases are now subject to much stricter financial checks, and estate agents are legally required to ask certain questions at an early stage. This also helps prepare buyers for the more detailed Source of Funds checks that solicitors and lenders will carry out later in the process. If queries arise late on, it can cause delays at a point when everyone is keen to move forward. By discussing Source of Funds early, buyers have a clearer idea of what documents may be needed, any potential issues can be resolved calmly in advance, and there is far less risk of a sale stalling once an offer has been agreed. Our aim is always to keep the process as straightforward and stress-free as possible.
How You Can Prepare
To help things run smoothly, it’s a good idea to keep bank statements to hand and let us know early if any part of your deposit is a gift (Checks will also need to be carried out on the donor of funds). It’s also helpful to retain paperwork relating to the original source of your funds and how they’ve moved over time, as solicitors will need to see a clear pathway showing where the money came from, why it was received by you, and what has happened to it while in your account.
If you invest in cryptocurrency, it can be a good idea to have a dedicated bank account for these funds, as adding crypto proceeds to your main account can complicate checks and is one reason why buyers may fail Source of Funds requirements, which can risk a sale falling through.
Don’t worry about asking questions — this is all a normal part of the buying process. Nothing is expected to be perfect; clear and honest information is what matters.
Buying a property is a big step, but the good news is you can start preparing well in advance — it’s never too early to set yourself up for a smooth and successful purchase!
Thank you to Matt Gillies, Managing Director at RG Law for inspiring this blog.
