Here's How Big Suze Orman Says Your Emergency Fund Should Be Before You Buy a House

Do you have enough saved to buy a home?

Buying a house is a huge financial decision and it's one you must ensure you are ready for. You'll need to take on many new financial obligations as a homeowner, including making monthly mortgage payments, covering the costs of property tax and insurance, and paying for any necessary home repairs out-of-pocket.

To make certain you can consistently cover all of the essential costs of homeownership -- even if you experience a decline in income or interruption in earnings -- you should have an emergency fund before you buy a property.

But how big should that emergency fund be? Here's how much finance expert Suze Orman thinks you should have in savings before you move forward with buying a property.

Suze Orman recommends a pretty big emergency fund before you buy

On her blog, Suze Orman stresses the importance of having cash in reserve if you're considering purchasing a home. Specifically, she recommends you have enough money in savings to cover eight months’ worth of living expenses.

This is larger than the standard recommendation that most experts make, as many financial professionals suggest you have an emergency fund with three to six months of living expenses.

But Orman is more conservative for good reason -- foreclosure can be absolutely devastating to your finances. The larger your emergency fund, the more you can reduce your chances of becoming unable to make your housing payment if something goes wrong.

Why does Orman suggest having such a large emergency fund?

The most obvious reason to have a substantial amount of emergency savings is so you're prepared to pay for housing-related expenses even if problems arise. This not only includes being able to cover your mortgage for a few months in the event of a job loss, but also being able to pay for unexpected repairs.

Orman urges home buyers not to rely on their retirement investments as a form of emergency savings, as taking money out of retirement accounts could come with penalties and put your future financial security in jeopardy. "Cashing out your retirement funds early to cover your mortgage will satisfy your lender, but compromise your retirement," her blog warns.

But the ability to keep up with housing costs isn't the only reason Orman believes it's important to have emergency savings. As she explains, lenders also want to see that you have plenty of cash reserves as this reduces their risk of giving you a loan.

If you can show a potential mortgage lender you have enough money in the bank to pay the bills even if you experience an extended job loss, it is much more likely to loan you money at a favorable rate.

Since a large emergency fund can help you qualify for an affordable loan and help ensure you can keep paying that loan on an ongoing basis, it's worth listening to Orman's advice and making sure you have the savings you need before making an offer on a home.