Bank account consolidation

Home Forums Purchase Program Bank account consolidation

Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • #48144
    #48152
    TTrumble
    Member

    Hello Al92,

    Your counselor was right in that nobody needs that many checking accounts. Drop at least one of the personal use accounts and consolidate them into one.

    Because you have 1099 self-employment income, a separate account to track that income and the associated expenses is a good idea since it is essentially your business checking account. If you were a W2 employee, I’d be encouraging you to close that one too however.

    If there is some specific reason you have kept two personal accounts, simply track them going forward in an Excel spreadsheet or even a handwritten ledger. The fact of the matter is that the more bank accounts you have, the harder it is to accurately track where your money is going, contrary to what some people feel. Additionally, you should really be able to tell with reasonable accuracy how much money is going where off the top of your head. You should KNOW where your money is going, not just be able to look it up somewhere. If you aren’t consciously aware of where it’s going, I promise you your’re not in control of it as well as you may be thinking. Entering it into a spreadsheet, a budgeting app or even a handwritten ledger will help you start to understand where it is going very quickly.

    Having fewer accounts will also make it easier for both you and us to track whether your are saving your Payment Shock each month, since Payment Shock is determined by the sum total of all accounts at the end of each statement cycle. If you have money shuffling between several accounts, it makes it much easier to lose track of where you really stand in showing that you can afford that larger monthly mortgage payment you are seeking.

    So yes, get rid of the second personal checking and keep a written budget to teach yourself where your money is going and more easily track your Payment Shock. You’ll probably be very surprised about what you learn.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    • This reply was modified 1 year, 10 months ago by TTrumble.
    #48155
    Al92
    Member

    Thank you for the detailed response, Tim.
    I have no problem shrinking accounts into 2 checking and 1 savings.
    I have been tracking my finances on budget spreadsheet for the last 10+years. So I am totally in control of my finances. I have W2 income and 1099s therefore its essential for me to keep both separate.

    #48269
    Al92
    Member

    I had my second appointment today.
    My counselor told that 2 checking accounts and 1 savings account is still too many.
    BofA checking account is for personal use where the whole amount of my paycheck is (direct) deposited.
    DCU (second) checking account is where I receive payments for 1099 income and pay my auto loan. For the second checking account, savings account, and auto loan I receive 1 combined statement. Since it is a credit union I can’t close savings account and it has no transaction except $5 minimum amount which I have to keep there.
    My counselor told that it would be complicated and might take longer for the underwriter to approve my loan. He is still inclined towards closing one of my checking accounts. Isn’t it going to complicate it more if I transfer lump sum from closing account to my current account?
    I don’t want to delay my qualification due to minor issues.

    #48271
    southflorida
    Member

    I personally don’t think that 2 checking accounts and 1 savings account is too many specially in your case that you have 2 different sources of income. In my case I had 2 checking accounts, however, during the NACA process I did not touch one of them. Try to get the office manager’s opinion

    #48301
    TTrumble
    Member

    Hello Al92,

    In reality, there are valid arguments on both sides of this question.

    Since you have both W2 and 1099 income, separate accounts to track each is not unreasonable. It’s one of the extremely rare times you’ll see me saying an additional account is okay.

    Your counselor was correct though that it might make things more complicated, especially where determining your Payment Shock Savings is concerned. Remember that Payment Shock is determined by the growth in the sum total of all bank accounts each month. Therefore, more accounts simply means more to track. It can be even more confusion if the closing/statement date for the BOA and Credit union accounts are on different days of the month. That’s why we so strongly suggest only one checking and one savings account.

    That having been said, it can still be done with more accounts, and because of your unique circumstance, it’s justifiable. The thing you need to make sure you do without fail is track those accounts and the grand totals consistently to make sure you don’t accidentally mess up your Payment Shock and show a consistent savings patter to build MRF even if you have zero Payment Shock. You’ll need to pay a little closer attention to your accounts than most, but you should be okay. Since you’re already doing that with the spreadsheet, supply hard copies of the spreadsheet too to prove that you are keeping things on track.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    • This reply was modified 1 year, 10 months ago by TTrumble.
Viewing 6 posts - 1 through 6 (of 6 total)
  • You must be logged in to reply to this topic.