2 Reasons You Really Need an Emergency Fund Before Buying a Home

by Christy Bieber | Updated July 19, 2021 - First published on May 21, 2021

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Emergency Savings Jar

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It could save you from a major financial disaster.

If you're 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 in it to cover several months of living expenses (usually between three months worth and six months).

Saving such a large amount of money may seem difficult, especially if you're also working to save up for a down payment and to cover closing costs. And you may not want to wait until you have emergency savings to make your homeownership dreams a reality.

But while it's understandable that you might want to buy a home without waiting until you have emergency savings in the bank, doing so could be a decision you quickly come to regret.

Here are two big reasons why it's imperative you have cash 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 absolutely want to make sure you're able to pay. If you can't make your mortgage payments, you risk losing your home to foreclosure. This 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 don't end up in a situation where you can't cover the mortgage. If you lose your job, have medical issues that make work impossible, 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 issue that stops you from paying the mortgage for good, your emergency fund can hopefully cover the costs until you have time to sell the property so you won't be in a rush to do so immediately.

2. To be prepared for home repairs and expenses

One of the big downsides of homeownership is that your landlord will no longer do 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're the one that has to pay for it.

Some home repairs come by surprise and are very expensive -- and in many cases, these types of repairs can't be avoided. If your furnace breaks in the dead of winter or if your roof develops a leak and water is pouring in, you're going to need to pay for a fix ASAP.

An emergency fund helps to ensure that you won't go into debt or be left struggling to find the cash to pay for these surprise costs. Over time it can be better to build a home maintenance fund to cover these costs -- but until you have that 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 end up unable to make payments on it, you can maximize the chances that buying a house will be a good financial choice that pays off in the long run.

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