Buying a car while refinancing your home can cause some problems if you don’t have a lot of cash available.

Q: Is it ok to buy a car while I am refinancing my home if I am paying cash for the car?

A: If you don’t take out a loan for the car and you have plenty of cash left over, then it shouldn’t affect your refinance. But it’s better to be safe than sorry. If the lender sees a large chunk of cash coming out of your account, it might put the brakes on what would otherwise be an easy refinance.

The issue lenders have with large withdrawals from an account during a loan approval process is that it can change the game with the lender. If the lender reviews the loan and sees a certain amount of cash in the bank, the bank may then approve the loan based on that amount of cash. If you spend the cash, the loan underwriting changes along with it. You might perceive that the changes are small but if your loan requires you to have $10,000 in cash in hand to buy your home and you buy a used car for $5,000, the lender will not fund the loan.

If you have ample cash on hand and that cash is more than enough to cover any amount required by the lender, you might not have problems with the loan transaction. But better be safe than sorry and wait to buy the car until you have closed on the purchase of the home.

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