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A mortgage preapproval letter is usually good for 30 to 90 days, and some lenders will lock the rate for that time.

Having a letter of preapproval from a financial institution can help ensure that you’re ready to snap up a home you love.

What Is Mortgage Preapproval?

Mortgage preapproval has become an essential part of the home-buying process. Real estate agents often want to see a preapproval letter before showing houses.

Note: A SoFi Verified Preapproval Letter is valid for 90 days.

A letter shows sellers that you are serious about buying their home — even if you’re a first-time homebuyer — and that a mortgage lender is likely to give you a home loan of a specific amount quickly.

The lender will review your credit history, credit score, income, debts, and assets to determine the amount you tentatively qualify for.

Preapproval will help you focus on homes that are in your price range. Knowing how much of a mortgage you can afford is important when you don’t want to waste time reviewing homes outside your range.

Mortgage Preapproval Process

The mortgage process starts informally for many would-be homebuyers.

Some buy into the 28% rule — spend no more than 28% of gross monthly income on a mortgage payment — and play with calculators like this home mortgage calculator with taxes and insurance or the one later in this article.

Seeking mortgage preapproval means you’re getting serious. First, you’ll need to understand the different types of mortgage loans — fixed rate, adjustable rate, conventional, government insured (FHA, VA, USDA), jumbo — and what you can qualify for.

Then you’ll need to apply for a loan from one to several lenders and provide a good deal of documentation. Each lender will perform a hard credit inquiry, and you’ll receive a loan estimate within three business days.

If you’re shopping for a home loan, allowing multiple mortgage companies to check your credit within 14 or 45 days, depending on the credit scoring model being used, will minimize the hit to your credit scores.

How Long Does It Take to Get Preapproved?

It usually takes seven to 10 business days to receive a preapproval letter after submitting all the requested information.

Mortgage Preapproval Letter

Other than stating the specific amount you’re preapproved for, a mortgage preapproval letter may outline stipulations to gain the loan, such as maintaining your employment or not taking on any additional debt.

How Long Does Mortgage Preapproval Last?

Some lenders will make a commitment of 60 or 90 days. That time frame tends to work, since homebuyers typically shop for a home for 10 weeks, according to the National Association of Realtors®.

Other lenders will issue preapproval for only 30 or 45 days.

Recommended: How Mortgage APR Works

Mortgage Prequalification vs. Mortgage Preapproval

Since they sound similar, it’s worth mapping out the difference between prequalification and preapproval.
Prequalification is a key first step, when borrowers tell lenders about their income, assets, and debts. Lenders use that unverified information, and usually a soft credit inquiry, to give a ballpark estimate of how much they might be willing to lend.

The response is quick: You can often get prequalified immediately or within a day or two. Just realize that prequalification does not mean that a lender is guaranteeing a loan.

The mortgage preapproval process is a deeper dive and requires documentation.

To gauge whether you qualify for a mortgage, lenders will scrutinize:

•   Income: Employees will need to provide pay stubs, W-2s, and tax returns from the past two years, as well as documentation of any additional income, such as work bonuses. Self-employed workers often need two years’ worth of records and a year-to-date profit and loss statement, although many lenders and loan programs are flexible.

•   Assets and liabilities: You’ll need to provide proof of savings, investment accounts, and any properties. Lenders view assets as proof that you can afford your down payment and closing costs and still have cash reserves.

Lenders also look at monthly debt obligations to calculate your debt-to-income ratio.

•   Credit score: Your credit score is a three-digit representation of your credit history.

Recommended: What Is Considered a Bad Credit Score?

Once your lender has reviewed the information, it may offer a preapproval letter. Importantly, receiving preapproval from a lender does not obligate you to use them.

Estimate Your Mortgage Payment

Before you seek prequalification or preapproval, you might want to get an idea of how much your monthly mortgage payment could be. Use the mortgage calculator below to quickly see the difference in mortgage payments based on down payment, interest rate, and a 15- or 30-year term.

What Should I Do If My Mortgage Preapproval Expires?

Lenders put an expiration date on preapproval letters because they need to have your most up-to-date financial information on hand. The credit, income, debt, and asset items they reviewed for your preapproval typically need to be updated after the letter expires, and your credit may be checked again.

You can minimize the effect of “hard pulls” on your credit score by avoiding seeking a renewal when you’re not actively shopping for a home.

If your finances have mostly stayed the same, your lender is likely to renew your preapproval.

Finalizing Your Mortgage

If you find a house while your mortgage preapproval is still valid, you can choose a lender and move on to finalizing your mortgage application. At this point, in many cases, the lender will check again to see if there have been any changes in your financial situation.

The mortgage underwriter will review all the information, order an appraisal of the chosen property and a title report, and consider your down payment. Then comes the verdict: approved, suspended (more documentation is needed), or denied.

Your mortgage is officially approved when you receive a final commitment letter. A closing date can be scheduled. It generally takes 43 days to close on a house, but it could happen in as little as 20 days.

Buyers may want to minimize changes, like applying for other loans or credit, when a home loan is in underwriting.

The Takeaway

How long is mortgage preapproval good for? Often 30 to 90 days. Getting prequalified is a smart precursor to getting preapproved for a mortgage. Preapproval can give you a competitive edge in a tight home market, and helps you more clearly understand how your home mortgage loan will affect your monthly budget.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

How does mortgage preapproval affect my credit score?

The preapproval process involves a hard credit inquiry, which may cause a dip in your credit score. Each hard pull may lower your credit score but typically by less than five points. Multiple hard inquiries are usually counted as one inquiry as long as they are made within the same 14 to 45 days.

What’s the difference between mortgage prequalification and preapproval process?

Prequalification usually takes just minutes and requires you to provide only the most basic financial information in the application process. It also results in only a soft inquiry on your credit score. Preapproval will require more in-depth information, such as pay stubs and tax returns, and involves a hard credit inquiry. Getting preapproved may take a week or 10 days.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

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If you’re looking to buy a condo or townhome, understanding the distinctions may help you home in on the choice that better suits your lifestyle and needs. Read on to learn the major differences between these two kinds of property.

What Is a Condo?

A condominium is a private property within a larger property, whether that be a single building or a complex. Residents share amenities like clubhouses, gyms, pools, parking, and the common grounds, and pay homeowners association (HOA) dues to support those shared assets. If you buy a condo, you’ll own your interior space only.

What Is a Townhouse?

A townhouse is a single-family unit that shares one or more walls with another home, usually has two or more floors, and may have a small backyard or patio. If you buy a townhouse, you’ll own the interior and exterior of the unit and the land on which it sits. Upkeep of the exterior could be split between you and the homeowners association (HOA).


💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

Condo vs Townhouse: Differences

Both are part of a larger structure, unlike some other house types, and both usually share one or more walls, but some similarities end there. Here are the key differences.

1. Construction

In the condo vs. townhouse debate, construction differs. A townhouse will share at least one wall with a property next door. A condo could have another unit below and above it, in addition to neighbors on either side. That could mean sharing all surrounding walls and floors/ceilings.

2. Actual Ownership

If you’re considering townhouse vs. condo, what would you actually own? With townhomes, the buyer owns the land and the structure. That could mean some creativity with decorating the lot or the home’s exterior. With condos, the buyer owns the interior of the unit and an “interest” (along with all of the other owners) in the common elements of the condominium project.

3. Community

With both condos and townhouses, residents will have fairly close contact with their neighbors. With shared walls and spaces, residents may have more social relationships with their community than they would with a single-family home. That means it’s important for buyers to research the community when condo shopping. Is the condo social? Does it plan a lot of events, or do people generally keep to themselves? Since there are many shared spaces, understanding how the community functions could directly affect living there.

If a townhome isn’t part of an HOA, living in the complex could feel similar to living in a single-family home. In that case, it could be up to the buyer to create a sense of community.

4. Homeowners Associations

Condos come with an HOA, a resident-led board that collects ongoing fees that can range from $200 to thousands of dollars, and mandates any special assessments. The HOA also enforces its covenants, conditions, and restrictions (CC&Rs).

Not all townhouse communities have an HOA, but if they do, townhouse owners usually pay lower monthly fees than condo owners because they pay for much of their own upkeep.

5. Obligations and Regulations

What’s the difference between a townhouse and a condo when it comes to rules and regulations? Condo owners will be required to meet all HOA standards. That could dictate anything from what residents want to hang on their front door to whether they can have pets, how many, and whether Biff needs to be registered as a service animal or emotional support animal. If an owner wants to renovate their condo, they may have to get the work approved by the HOA.

If a townhome is part of an HOA, many of the above restrictions could apply. However, if it’s not an HOA community, townhouse owners have more freedom to decorate the exterior of their home or maintain their landscape as they see fit.

6. Insurance

Condos have their own form of property insurance. HO-6 provides coverage for the interior of a condo and the owner’s personal belongings. In addition, the entire building needs to be insured, which is paid for with HOA dues.

If a townhouse is part of an HOA community, each property requires HO-6 insurance and coverage for the community through HOA dues. When a townhouse isn’t part of an HOA, buyers are typically required to have homeowners insurance.

7. Fees and Expenses

HOA fees for condos are usually higher than for townhouses because they cover exterior maintenance and shared amenities. If townhouse owners are part of an HOA, they’ll usually pay lower monthly fees because they pay for much of their own upkeep.

Condo owners don’t have to worry about repairing the roof or replacing siding. Everything exterior-facing is managed collectively and paid for with HOA dues, but those fees may be high and are periodically reevaluated, and so may rise over time.

8. Financing

It can be harder to obtain financing for a condo than for a townhouse. Condos may be eligible for conventional mortgage loans and government-insured loans. (Study the mortgage basics to learn more about the difference between these types.) Lenders of conventional loans will review the financial health of an HOA, whether most of the units are owner-occupied, and ownership distribution. Interested in an FHA loan or a VA loan? Both agencies maintain respective lists of approved condos.

In the case of a townhouse, the financing process is similar to that of a traditional mortgage because a townhouse includes the land it’s built on. Its value is factored into the process.

9. Resale Value

A large factor in a condo holding value is the management, which isn’t always in the hands of the owner. Strong management can help a condo maintain or grow in value. Additionally, where the condo is located will influence resale value. Condos generally hold value but don’t see the boost in resale expected with single-family homes. Similarly, buying a townhouse may not usher in the appreciation of most single-family homes.

💡 Quick Tip: Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

Condo vs Townhouse: Which May Be Right for You?

Condos and townhomes have their fair share of differences, as well as some similarities. Overall, condos can offer a low-maintenance property where owners simply look after their condo interior. With condo ownership comes the added perk of shared amenities. But condos come with monthly HOA fees, which must be factored into any purchase. Additionally, the community association and its management of the property will likely have a large impact on what life is like in a particular condo complex. Condo buyers may be more community-minded, as they share space with their neighbors. (If a condo feels like the right choice, read a guide to buying a condo as you embark on your search.)

Townhouses offer more freedom and privacy than condos. Owners may have the option of personalizing their exterior and enjoying outdoor space if the property has a patio or backyard. Townhomes generally require more responsibility and upkeep than a condo, even if there’s an HOA involved. Exterior maintenance will be required. If this sounds like a good fit, dig deeper by reading a guide to buying a townhouse.

Of course, you may be better suited to a different living situation altogether. House or condo? Take a quiz to learn which of these options might be best for you.

The Takeaway

When it comes to finding a home, the perfect fit is up to the individual, but buyers may want to take a hard look at monthly fees, community rules, how social they intend to be, and precisely what they own and must maintain.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Between condos and townhouses, which is cheaper to buy?

The cost of a condo and townhome will vary based on location and size, but condos are often less expensive than townhouses because they come with no land.

Do you own the land around a condo if you buy it?

No. The purchase of a condo only includes the interior.

Is the resale value higher for a condo or townhouse?

In general, condos and townhomes don’t appreciate as quickly as single-family homes. The value will vary based on area, upkeep, and other conditions.

Between condos and townhouses, which has better financing options?

Financing a townhome is like financing a single-family home. A buyer can choose from multiple types of mortgages.

Financing a condo, on the other hand, involves a lender review of the community or inclusion on a list of approved condominium communities. Because a private lender could see a condo as a riskier purchase, the interest rate could be higher unless a large down payment was made.

Photo credit: iStock/Inhabitant

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

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Once you begin looking for financing options, you may find your search leads you to multiple forms, including personal loans. One choice available to prospective borrowers is a short-term loan.

A short-term loan is a personal loan that can help with personal financial needs. But this type of loan may not fit every situation, since it typically only provides limited funds. Read on to find out whether a short-term loan may help you meet your financial goals.

What Is a Short-Term Loan?

When you take out a short-term loan, you borrow funds to address immediate financial needs for a limited period. These loans serve a variety of functions, depending on your situation. For example, individuals may take out a short-term loan to keep them afloat until their next paycheck.

Or, someone running their own business who needs to cover small expenses may take out a short-term business loan.

Recommended: Personal Loan Guide for Beginners

How Do Short-Term Loans Work?

Essentially, short-term loans operate on a short time scale. The approval process and repayment schedule occur quickly, usually within a year.

Average personal loan interest rates range from 5.99% to 36% APR, depending on the applicant’s creditworthiness. Short-term loans tend to be near the higher end of this scale, in addition to fees and penalties that may be charged by a lender.

However, lenders such as banks or credit unions offer varying personal loan terms and rates. So, it’s important to research and shop around before you apply for one.

What Can You Use a Short-Term Loan For?

Short-term loans can be used for many purposes when you need quick access to money and your cash flow is low. You can use the funds from a short-term loan to cover unexpected costs such as medical bills or for everyday expenses until you reach your next paycheck.

Businesses might use short-term loans in the form of merchant cash advances so they can replenish inventory or purchase new equipment even when short on cash. In this scenario, the business receives a lump sum of cash from a lender and repays it with a percentage of credit or debit card sales until the advance is paid in full.

Recommended: Guarantor vs. Cosigner: What Are the Differences?

Example of a Short-Term Loan

A bank overdraft can be considered a short-term loan the bank provides when your account balance isn’t sufficient to pay for a purchase you’ve made. In this scenario, your account lacks funds to make a payment, but the bank lends you that money. In return, you pay a fee.

How Long Is a Short-Term Loan?

Every loan varies based on the lender and applicant. Often, short-term loans mature within a year or less. However, it is possible to find a short loan term that extends up to two years. Any loan term longer than that qualifies as either a medium-term or long-term personal loan.

Characteristics of Short-Term Loans

Short-term loans have unique features, such as:

•   Smaller borrowing amounts compared to other loans.

•   Typically offered as unsecured loans.

•   High annual percentage rates (APRs).

•   Short repayment periods.

•   Sometimes weekly payments are required.

Benefits of a Short-Term Loan

Short-term loans come with certain disadvantages, mostly due to their high interest rates. But they can be helpful if you find yourself in a tight spot. Some benefits include:

High Approval Rates

Since short-term loans only provide limited funds, the lending requirements may be easier to meet. Because of that, more applicants have a chance of approval. Even though you may not need a stellar credit score, you could still have some trouble if you have a low credit score. Your lender may ask for proof of a steady income, among other criteria.

Online Application

Short-term loans are also easy to access. Lenders often offer online applications, so there’s no need to visit a brick-and-mortar office. Applications are typically easy to fill out, taking only minutes to complete.

Quick Access to Funds

The short-term loan processing time is usually fast. As a result, you will probably receive approval and loan proceeds faster than you would for a long-term loan. They might be a good option if you have an unexpected expense you need to pay as soon as possible.

Lower Accrued Interest

While short-term loans can come with high interest, they generally have a short time frame. Because of that, there are fewer total interest payments. As long as you pay on time, you could save money on built-up interest with a short-term loan.

Lower Credit Score Requirements

As mentioned above, you don’t typically have to have an excellent credit score to get approved for a short-term loan. Applicants with average credit scores may also be able to usually qualify for a short-term personal loan.

No Collateral

When it comes to the difference between a secured vs. unsecured loan, a secured loan means more risk on the borrower’s part. That’s because a secured loan requires collateral, such as your car or your home. But most lenders don’t require collateral for a short-term personal loan because it doesn’t carry enough risk.

Disadvantages of a Short-Term Personal Loan

While short-term loans are easier to qualify for, they may not be the right choice for everyone. Here are some drawbacks to be aware of:

Lower Limit

For borrowers who need a significant amount of money, a short-term personal loan may not be the right choice. The borrowing limits for these types of loans tend to be small, sometimes just a few hundred dollars, to make it easier to pay off in a short amount of time.

May Lead to a Cycle of Debt

Because of the high-interest rate and steep fees attached to short-term loans, they really aren’t long-term solutions. They might be an option in an emergency but can lead to a cycle of debt if relied on too often.

Types of Short-Term Loans

There are a few variations on the short-term loan available to you. The type of personal loan you apply for will generally depend on the amount of cash you want and how quickly you need it. Here are some worth considering:

Payday Loans

A payday loan is a short-term loan that some people use to tide themselves over financially until their next paycheck. The funds are meant to be repaid at the time of the borrower’s next payday — thus, the name. However, payday loan issues arise if the borrower can’t repay the loan in the short time frame required.

Installment Loans

Installment loans give borrowers a way to access a lump sum of money that’s repaid in monthly installments over a set time frame. A fixed-rate loan with steady monthly payments makes budgeting during the repayment period more convenient.

Lines of Credit

A line of credit is similar to a credit card. You receive a credit limit and can tap into the line of credit as needed. Funds can be taken out in installments of the amount needed at the time they’re needed. But you can’t surpass your limit, which the lender bases on your creditworthiness.

Merchant Cash Advance

Merchant cash advances are used by businesses that make mainly debit or credit card sales. As a means to secure cash, the business will borrow a lump sum, which is advanced against the business’s daily sales. The lender is then repaid through a certain percentage of the business’s daily sales.

Invoice Financing

Similar to merchant cash advances, invoice financing is a type of short-term loan that can help business owners meet financial needs. The business submits unpaid invoices, i.e., accounts receivable, to a lender as collateral. The lender charges a fee for the financing and can collect on the invoices if the borrower defaults.

Short-Term Loan vs Long-Term Loan

It’s always important to explore your options. Short-term loans probably aren’t the right option if you need a large amount of funds in a lump sum or will need to periodically draw small amounts from a set amount of credit. In these situations, a long-term loan might be a better solution.

Long-term personal loans can sometimes have high-interest rates depending on the applicant’s credit score and other factors used by the lender. They may not require collateral, which makes them seem risky to lenders.

Here’s a breakdown of how these two loans stack up against each other:

Typical Requirements to Get a Short-Term Loan

Requirements to be approved for a short-term loan vary by lender, but all lenders will evaluate your creditworthiness in some way. Generally, a higher credit score will likely secure you better terms and interest rates. You also need to be able to show your lender a range of personal and financial information such as proof of identity, verification of employer and income, and proof of current address.

Can I Get a Short-Term Loan With Bad Credit?

While short-term loans don’t typically require excellent credit, the higher an applicant’s credit score, the better their chances of approval. A lender may also offer more favorable interest rates and terms to a borrower with a higher score. Since short-term loans are often for relatively small amounts of money, requirements tend to be more relaxed.

Personal Loan Options From SoFi

SoFi offers personal loan options to fit a variety of financial situations and needs. With competitive interest rates and a range of terms, there may be a SoFi personal loan that works for you. SoFi does not charge fees on personal loans, so you only repay the loan principal and interest. A personal loan calculator can help you compare loan options and figure out monthly payments.

The Takeaway

What is a short-term loan? It’s a small loan that’s designed to be repaid quickly, usually within 12 to 18 months. Short-term personal loans vary based on your financial situation and the lender you use. Some lending institutions use high-interest rates and hidden fees that can add to the overall cost of a short-term personal loan. That doesn’t make a personal loan bad, but it’s important to be aware of what you’re agreeing to when you borrow money.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

Photo credit: iStock/kitzcorner

About the author

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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You can sometimes reopen a closed bank account depending on the bank’s policies and the reasons for the closure. Accounts that you closed or that were closed due to inactive status tend to be easier to reopen than those that were terminated due to problems like frequent overdrafts. This guide will help you navigate having a closed bank account that you’d like to reopen.

Why Might You Need to Close a Bank Account?

Account holders may decide to close a bank account for a variety of reasons, including the following:

•   No longer needing the account

•   Moving to a new location

•   Lack of convenience

•   Dissatisfaction with the account

•   Issues meeting minimum requirements

Here’s more about each.

No Longer Needing the Account

Sometimes, you simply might not need a bank account anymore. For example, if you’d set up a separate savings account to save enough money for a down payment on a house or for a vacation, after you’ve accomplished those goals, you might decide that you don’t need multiple bank accounts anymore.

Moving to a New Location

If you’re moving to a new community that doesn’t have a branch of your financial institution nearby, you may decide to close your bank account and open a new one that’s more readily accessible in your new town. Moving doesn’t create a problem when someone banks solely online, but it can lead someone to switch banks if they prefer in-person options.

Lack of Convenience

Another potential reason someone might switch banks is due to a lack of convenience, such as a bank’s hours being incompatible with their schedule or the bank not having a widespread enough network of ATMs so they wind up paying many ATM fees. When banking becomes inconvenient through a certain financial institution, that could spur someone to seek a more practical solution.

Dissatisfaction With the Account

Whether it’s poor customer service, a lack of desired services, or fees that are too high, customers sometimes close their accounts and go elsewhere because they aren’t satisfied with their current financial institution. If, for instance, you see an offer for a savings account that earns more interest and charges lower fees, you might decide to make a switch.

Issues Meeting Minimum Requirements

If a bank requires you to maintain a certain balance to keep the account open or to avoid hefty fees, an account holder may opt to close the account if they’re struggling to meet those requirements. By closing a savings account with a minimum balance that’s just out of reach, for instance, someone could avoid incurring fees each month when they don’t make the minimum balance requirement.

Is It Bad When a Bank Closes Your Account?

Whether it’s bad when a bank closes your account depends on why the bank closed it — and situations can vary. According to the governmental agency, the Office of the Comptroller of the Currency , banks typically can close accounts for nearly any reason without providing notice.

That being said, common reasons why a bank may close an account can include:

•   Low or no activity: Banks may place an account in a dormant status after a certain period elapses with no transactions. With a dormant account, it’s not technically closed, but the account owner is no longer able to make transactions. How long it might take for an account to go dormant depends on both state laws and a particular bank’s policies.

   After an account has been dormant for a period of time, a traditional or online bank may close the account and, if you can’t be reached, forward the funds to the proper state government, labeling them as “unclaimed property.” At this point, you’d need to submit a claim to your state’s treasury office to obtain that money.

   Recommended: How to Find a Lost Bank Account

•   Suspicious activity: A bank will close an account if it has proven the account to be involved in fraudulent activity. When the bank initially suspects fraudulent behavior (whether the account holder was the perpetrator or the victim), the bank will likely freeze the account to investigate. Red flags can include large transactions, frequent account activity (especially if that activity is new or different), and transfers to overseas accounts.

•   Excessive overdrafts: If an account holder regularly spends more from an account than what’s available, this leads to negative balances and bounced checks. A bank can charge overdraft fees and require that the account holder bring in sufficient funds to return the account back to the minimum balance required. If that happens frequently or if funds are not restored, however, the bank may close the account.

Worth noting: If your bank account is closed due to a negative balance or suspicion of fraudulent activity, this may make it difficult for you to open a new bank account. Those issues will be on your record with ChexSystems, an industry reporting agency. You might need to explore what are known as second chance checking accounts in order to open a bank account again.

Do You Get Your Money If a Bank Closes Your Account?

By law, a bank must refund to you any money in a closed account after subtracting fees that are due. Typically, a check will be sent to the account holder. There is a possibility that the bank might move the money into a different type of account.

If the bank cannot reach you about this matter, your funds could be sent to the state as unclaimed money.

How Long Do Banks Keep Closed Accounts?

For deposit accounts of $100 or more, a bank must retain records for at least five years. However, this doesn’t necessarily mean that you can reopen the account within that time frame.

You’ll learn more about how you might reopen a closed account below.

Can You Reopen a Closed Bank Account?

There isn’t a simple yes/no answer to “Can a closed bank account be reopened?” You may be able to reopen a closed bank account in some situations. It will depend, however, on why the account was closed and your financial institution’s policies.

Usually, it’s a wise move to contact the bank, find out why your account has been closed, and see if it’s possible to use it again. You might be able to reactivate a dormant account simply by making a withdrawal or depositing funds (see below for more details). But if a bank account has been closed due to, say, suspicions of fraud, you may not be able to reinstate it.

Next, you’ll learn the steps involved if you do try to reopen a closed bank account.

How Do You Reopen a Closed Bank Account?

If you’ve closed your account (rather than a bank doing so), you can typically submit a request to reopen, say, your checking account. This can be done online, over the phone, or by visiting a branch in person, with the exact process varying depending on the specific financial institution.

Another option you have in this situation is to simply open a new bank account, whether at your previous financial institution or at another one of your choice. When choosing your account, it’s worth exploring the different types of savings accounts you might consider.

On the other hand, if your bank account gets closed by a bank, whether or not you can reopen it largely depends on the reason for the closure as well as your bank’s policies.

In general, the first step in reinstating a troubled account is to talk to your financial institution about why your account was frozen, put into dormant status, or closed. Ask what you need to do to address the issues. You can also review your account agreement. If you believe that a bank wrongfully closed your account, you can file a written complaint .

Here’s guidance on how to reopen a closed bank account in three scenarios.

Reopening a Dormant/Inactive Account

This is one of the simplest issues to address. If you receive a notification that your account is considered inactive or dormant, contact your bank to find out how to make it active again. The bank may allow you to make a deposit to the old account, or they may have you open a new bank account.

💡 Recommended: What Do You Need to Open a Bank Account?

Reopening an Account After Closure Due to Excessive Overdraft

Financial institutions need to monitor their levels of risk. If they close a bank account for excessive overdrafts, the account holder would likely need to talk to the bank to see if they are willing to reopen the old account or if they’d allow them to open a new one. Different banks will have different policies. You may be required to pay off your negative balance, sometimes within a specified timeframe, before you can reopen your account.

Reopening an Account Closed for Suspicious or Fraudulent Activities

If a bank believes that a customer is engaged in fraudulent behavior (rather than being a victim of it), then it may be difficult to reopen an account or to open a new one with the institution. Contact the financial institution, and be prepared to demonstrate how any activity in your account that appeared suspicious was, in fact, not fraudulent or not your fault.

How to Prevent Bank Account Closures

In order to avoid your bank account being closed, it’s a good idea to:

•   Use it regularly so it doesn’t go dormant.

•   Set up alerts for a low balance. That way, you can remedy a situation which could lead to closure due to your overdrafting.

•   Review communication from your bank. You might get a notice that your account has issues, but if you don’t read it, you can’t take steps to prevent closure.

Recommended: APY Calculator

The Takeaway

Whether or not you can reopen a closed bank account largely depends on why it was closed in the first place. Sometimes, an account holder in good standing decides to close a bank account and later changes their mind. In that case, the financial institution will almost certainly allow them to have an account there again. Other times, the bank closed the account, perhaps because of excessive overdrafts, suspicious activity, or lack of use. In those instances, talk to the financial institution to see what steps you need to take.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Can a bank close your account?

Yes, it can. According to a governmental agency that oversees financial transactions, banks can close accounts for virtually any reason without notice.

Is it bad when a bank closes your account?

Whether it’s bad depends upon the reason why the bank closes your account. Sometimes, a bank account is closed because of inactivity. Other times, it can be a more concerning situation, one that can make it harder to open an account in the future. For instance, the bank may have flagged the account for suspicious or fraudulent activity. Another reason why a bank may close an account is excessive overdrafts.

Can you reopen a closed account?

Whether you can reopen a closed account depends on who closed the account (you or the bank), the reasons why the account was closed, and the bank’s policies. Talk to your financial institution to find out what steps you would need to take in order to reopen your account.

How do I prevent my bank account from being closed?

To prevent your bank account from getting closed, use the account regularly and set up low balance alerts so you can avoid overdrafting. If your account is troubled, talk to your financial institution. Explore what solutions might exist to keep your account open and return it to good standing. It might also be beneficial to brush up on your financial habits and the basics, such as how savings accounts work.

Will a direct deposit reopen a closed account?

No. If an account is closed, the direct deposit funds will have nowhere to be deposited and so the transaction will not go through. To address this situation, talk to your bank about reopening the account and let the payer know that there is an issue with the account tied to your direct deposit.

About the author

Kelly Boyer Sagert

Kelly Boyer Sagert is a full-time freelance writer who specializes in SEO-optimized blog and website copy: both B2B and B2C for companies ranging from one-person shops to Fortune 500 companies. Read full bio.

You may also be interested in:

How to Close a Bank Account

Guide to Bank Account Closure Letters

Do Closed Bank Accounts Affect Credit Scores?

Photo credit: iStock/Delmaine Donson

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOBNK-Q424-101

After making a deposit to a bank account, in many cases, not all of the money is immediately available for use. This temporary delay in the availability of funds is called a “hold.” Typically, a deposit hold will only last one to two business days. Sometimes, however, deposited funds may be held for as long as seven business days. This might be the case if your account is new, the deposit is for a high amount, or the bank has a reason to suspect a check will not clear. Hold times are governed by federal law. In addition, each financial institution has its own policies on hold times.

While these policies are in place for the bank’s protection as well as your own, it can be frustrating when you can’t spend your own money, which may lead you to wonder how to remove a hold on a bank account.

What Is a Hold on a Bank Account?

When a financial institution puts restrictions on an account holder’s ability to withdraw or otherwise use their funds, this is what’s called a “hold.” A hold on a deposit into your checking account typically lasts a relatively short amount of time, perhaps a day or two.

Financial institutions use the information in Federal Regulation CC to create their own holds policies. These policies usually provide information on the timing of funds availability based on the type of deposit being made, when it was made during a business day, and the amount of the deposit.

Why Banks Place Holds on Money

Overall, a bank uses a hold to protect the institution from possible loss if the funds don’t clear from the institution where the money is being drawn. Basically, the bank wants to ensure that a check is legitimate and that it won’t bounce.

Financial institutions may also place holds if they suspect fraud and are investigating. This can in turn protect the account holder.

How Long Holds Last

The length of a hold depends on a number of factors, with deposits potentially clearing on the same day or in up to seven days.

When it comes to a check deposit, the Federal Reserve requires that the first $225 must be made available to the account holder on the next business day (which doesn’t include weekends or bank holidays). Typically, a bank will make the balance of the check available by the second business day. However, there are some occasions where hold times can be as long as seven business days. This can happen if the check amount exceeds $5,525 or your account has been open for less than 30 days. Other reasons your deposited funds may be on hold for an extended period of time include:

•   An older check

•   A check that’s being redeposited

•   Deposits where an involved party has a history of overdrafts

•   Instances where there’s suspicion of fraud

Meanwhile, official checks like cashier’s checks, certified checks and government checks should clear on the day of deposit.

How to Remove a Hold on a Bank Account

As for how to manage or remove a legal hold on bank account deposits, you do have a few options, including reviewing your bank’s policy or contacting your bank. You could also simply wait it out. Here’s more on each of your possible options.

Wait It Out

If you’re not in a hurry to spend or transfer the funds being held, you can simply wait until the hold is taken off, given holds usually only last a matter of days. Keep in mind, however, that those days are business days — if there’s a bank holiday or a weekend coming up, your wait is bound to be longer.

Review Your Bank Policy

A notice of funds availability must be included on pre-printed deposit slips, but Regulation CC notes that it only needs to state that deposits may not immediately be available for withdrawal. So if you’d like to learn more specific information about the length of holds, you can often find your bank’s policies online or by contacting them. This information is also typically provided to you when you first open your account.

Armed with this information, you may be better able to plead your case with the bank to lift the hold — especially if you find out the hold is outside the norms.

Contact Your Bank

If deposited funds are being held for a longer period than you expected, it’s a good idea to call, email or stop by a branch of your bank to ask about specifics of its hold policy. You can ask your bank to provide an explanation for the hold or sometimes even to release the hold. Keep in mind, however, that it can be difficult to get a bank to remove a hold. And since all banks have them, you can’t switch banks to avoid them either.

How to Prevent Holds

Rather than worry about how to remove a hold on a bank account, it might be helpful to take proactive steps to prevent a hold in the first place. Read on for some suggestions for reducing or eliminating hold lengths in a variety of situations.

For Paychecks

If your employer offers it, sign up for direct deposit. This means that your paycheck will be electronically transferred through the Automated Clearing House (ACH), and these deposits usually clear more quickly — often becoming available the next business day. Plus, many financial institutions make paychecks that are electronically deposited immediately available.

For Large Deposits

If you know that you’re owed a large sum of money, ask for it to be paid by certified check, cashier’s check, or a form of government check (such as a money order purchased at the United States Post Office). These types of official checks typically clear quickly, usually by the next day. As another option, you could ask for the funds to be wire transferred.

For Deposits in Person

Making your deposits in person is a good way to prevent delays in funds availability. Doing so through an ATM or through an app, on the other hand, can result in longer holds.

Recommended: Can You Deposit Cash at an ATM?

For Deposits Into a Separate Account

This strategy doesn’t help to remove a hold on bank account funds, but it can help to prevent an overdraft due to a hold: Deposit funds that may come with a longer hold into an account that you don’t use regularly to pay expenses, such as your savings account. (Note that when funds are being held, you can’t transfer money to another bank from that deposit until it’s cleared.)

When Using Your Debit Card

When you use your debit card to make a purchase or a reservation, the merchant may place a temporary hold on some of the funds in your checking account. This is done as a safeguard to make sure you’ll have sufficient funds to cover the full payment. This can come up when you’re filling up at a gas station or reserving a hotel room or rental car. If you foresee the hold being an issue, consider paying with a method other than your debit card (such as a credit card) or transfer additional funds into your checking account to act as a buffer. It can also be helpful in this scenario if you’ve linked bank accounts.

The Takeaway

Financial institutions create hold policies for funds deposited into bank accounts under the guidance of the Federal Reserve. Holds generally are placed for two reasons: to ensure that funds are cleared and to protect the account holder when fraud is suspected. How long a hold lasts depends on a variety of factors, including the type of deposit, when the deposit was made, the age of the account, and a bank’s specific policies.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Why is the bank holding my deposit?

In general, financial institutions place holds for two main reasons: First, they want to make sure that a deposit will clear as a way to protect themselves and, second, sometimes they’ll place a hold on funds because they suspect fraud and are taking actions to protect the account holder.

What can I do if my deposit is placed on hold?

You can check your bank’s hold policies (usually given to you when the account was opened and/or available on the bank’s website) to see if you can wait it out. Or, you can contact the financial institution for more information about your situation and to request for the hold to be lifted.

How long do I have to wait before my deposit is released?

In general, the first $225 of a non-cash deposit must be made available on the next business day. The next $226 to $5,524 must be available in two business days, and amounts over $5,525 must typically be made available on the seventh business day. There are exceptions in either direction though, and keep in mind that these estimated time frames only apply to weekdays, not weekends or bank holidays.

How long can a bank put your account on hold?

A bank deposit hold can last anywhere from one to seven business days. In general, however, holds last for less than five days. The exact length of a hold will depend on a number of factors, including the type of deposit, the age of your account, and the bank’s policies.

Why is my bank account on hold?

A specific deposit may be on hold due to the bank enforcing its holds policy to ensure that the deposit clears, or there is concern about fraud. If the entire account is frozen, contact your financial institution for specifics. Note that if you have concerns about identity theft or other forms of fraudulent activity on your bank accounts, you can consider a credit freeze or credit lock to protect yourself while the situation is being resolved.

About the author

Kelly Boyer Sagert

Kelly Boyer Sagert is a full-time freelance writer who specializes in SEO-optimized blog and website copy: both B2B and B2C for companies ranging from one-person shops to Fortune 500 companies. Read full bio.

You may also be interested in:

What Is a Check Hold?

What Does ACH Hold Mean?

What Does a Pending Transaction Mean on a Bank Account?

Photo credit: iStock/RyanJLane

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOBNK-Q324-057