This could save you from a major financial disaster.
If you are considering buying a home, you may want to think twice, unless you have an emergency fund. An emergency fund is a savings account with enough money to cover several months of living expenses (usually three to six months).
Saving that much money can seem difficult, especially if you’re also working to save for a down payment and to cover closing costs. And you might not want to wait until you have emergency savings to make your homeownership dreams come true.
But while it’s understandable that you want to buy a home without waiting for an emergency savings in the bank, it could be a decision you’ll quickly regret.
Here are two big reasons why it is imperative that you have some money in savings before you act.
1. To make sure you can make your mortgage payments
Your mortgage payment will likely be one of your biggest monthly expenses. It’s also a cost you definitely want to make sure you’re able to afford. If you can’t make your mortgage payments, you risk losing your home to foreclosure. It can damage your credit for years to come and it can be a financially and emotionally damaging process.
An emergency fund can help ensure that you won’t find yourself in a situation where you can’t cover the mortgage. If you lose your job, have medical issues that make it impossible to work, or have other serious problems that prevent you from paying your mortgage, your emergency fund will ensure you have the money to cover the bill.
And if it turns out that you have a long-term problem that prevents you from paying the mortgage for good, your emergency fund can hopefully cover the costs until you have time. to sell the property so that you are not in a rush to do so. so immediately.
2. Be prepared for home repairs and expenses
One of the big disadvantages of home ownership is that your landlord will no longer do the repairs and maintenance for you. It’s up to you to keep your home in good condition by taking care of routine maintenance tasks. And if something breaks, you have to pay.
Some home repairs are surprises and very expensive – and in many cases these types of repairs cannot be avoided. If your furnace breaks down in the middle of winter, or your roof leaks and water pours into it, you’ll need to pay for a repair as soon as possible.
An emergency fund helps ensure that you won’t go into debt or struggle to find the money to pay for those unexpected costs. Over time, it may be best to build up a home maintenance fund to cover these costs – but until you have this type of savings account, an emergency fund is there to provide. the funds you need for unexpected repairs.
By having an emergency fund to protect your home so you don’t find yourself unable to make payments, you can maximize the chances that buying a home will be a good, profitable financial choice in the long run. term.
A Historic Opportunity to Save Potentially Thousands of Dollars on Your Mortgage
Chances are interest rates won’t stay at multi-decade lows much longer. That’s why it’s crucial to act today, whether you want to refinance and lower your mortgage payments or are ready to pull the trigger on buying a new home.
Ascent’s in-house mortgage expert recommends this company find a low rate – and in fact, he’s used them himself to refi (twice!). Click here to learn more and see your rate. While this does not influence our product opinions, we do receive compensation from partners whose offers appear here. We are by your side, always. See The Ascent’s full announcer disclosure here.