3 reasons to never apply for a mortgage if you don’t have emergency funds



A mortgage is a major financial commitment, and it is one that you need to be sure you are prepared for. This means that you should have an emergency fund in place. Ideally, you should have enough cash on hand to cover several months of running expenses, including your new mortgage payments as well as your other essential bills.

Here are three big reasons why reaching this financial milestone is so important before you apply for a mortgage and become a homeowner.

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1. You could risk foreclosure

Without emergency funds, an income interruption due to job loss or a medical problem could rob you of the money you need to make your mortgage payments. If this happens to you, the lender could go ahead with the foreclosure.

Since a mortgage is secured debt, mortgage lenders have the option to foreclose on your home if they force you. You could lose your home and most, or all, of the investment you made in it. You could also severely damage your credit, affecting all of your financial options for the foreseeable future.

An emergency fund helps ensure that even if something goes wrong, you can keep paying your lender until you get back on your feet.

2. You could face a lot of financial stress

Worrying about missing a mortgage payment can keep you awake at night. You don’t want to find yourself constantly stressed about losing your job or having unforeseen costs that make it impossible to pay your lender.

When you have an emergency fund, you have peace of mind. You will know that even if something goes wrong, you can keep a roof over your head. You don’t have one yet? Use this emergency fund calculator to help you get started building your emergency savings.

3. You may not have the means to maintain the value of your home

As a homeowner, you’re responsible for more than just making monthly mortgage payments. You should also perform routine maintenance tasks and make major repairs if something goes wrong. Without an owner to call, you will be the one who will have to pay the plumber, replace the appliances or redo the roof. And things can go wrong even with newer homes.

If you don’t have the money to handle the expenses of home ownership, you could find yourself in a tough spot where little problems turn into big or the structural integrity of your home is compromised. If this happens, you could find yourself underwater on your mortgage or owing more than the value of your house in its disrepair.

The problem is, not only are you reducing the value of your real estate investment and making your home less livable, you might also find yourself unable to sell your home enough to pay off your loan if you need to. You don’t want that to happen, and an emergency fund can help you make sure of this since you can use that fund to pay for necessary repairs.

As you can see, an emergency fund is crucial for your peace of mind and your financial future. Make sure you have one before applying for a home loan.


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