If you’re planning to refinance your home loan, the same rules apply. This means that your potential lender would need to check the usual stuff, including your assets, income, and credit to determine if you’re an ideal candidate for a refinance. This also means that they’ll check your bank accounts.
That said, if you don’t want to raise a red flag with your potential lender, there are specific money moves you’d be wise to avoid until after you’ve been approved for a refinance.
Make a Huge Withdrawal or Deposit
If the balance in your bank account suddenly increases by a significant amount, your lender would no doubt notice. This applies even if you have a reasonable reason for the huge deposit, such as a family member giving you money to cover your closing costs, your lender would still be concerned about your ability to make good on your refinance.
With this in mind, if you truly need to deposit a large sum, it’s best to inform your lender about it and provide relevant paperwork. When planning a home loan refinance, loan officers from Ogden add that you also need to be careful when withdrawing a significant amount of cash since your lender might see this as a red flag and lead them to reassess your application.
Move Money Constantly
Having sufficient savings in the bank would communicate to your lender that you’re financially responsible. However, they might have a hard time determining your bottom line if you’re always transferring money between various accounts. This is fine if your regular transfers involve your checking account and savings account because that means you’re essentially growing your savings.
On the other hand, if you’re constantly withdrawing money from your savings account and moving it elsewhere, this might communicate to your lender that you don’t know how to manage your finances well.
Done right, refinancing could save you if you’re approved. Keep in mind that how you manage your money before and during the application process could determine whether or not you get your potential lender’s approval.