Is it good to buy a house before saving for emergency funds?

Short answer is NO. You should have emergency funds first before buying a house.

What is an emergency fund?

An emergency fund is a savings account having enough money in it to pay for living costs for many months, usually between three to six months’ worth. It is a cash reserve that is set aside to cover large financial surprises such as unforeseen medical expenses, home-appliance repair or replacement, major car fixes, or unemployment.

2 reasons why you need an emergency fund before buying a home

Although it may be tempting to purchase a property when we have the funds in our savings account, doing so before having sufficient emergency funds on hand could cause you to rapidly regret your choice.

Here are the two main reasons why you must have your cash reserves first before taking action:

1. To make sure that you can afford your mortgage payments.

One of your largest monthly expenses will probably be your mortgage payment. Additionally, it’s a payment that you need to be quite certain you can cover. You run the danger of facing foreclosure if you can’t pay your mortgage on time. This may be expensive and emotionally draining, and it can harm your credit score for years to come.

If you have an emergency fund, you may avoid missing your mortgage payments. Your emergency fund will make sure you have the cash on hand to pay the bill, even if you lose your job, experience major health problems that make working impossible, or encounter other significant financial surprises that make it hard for you to pay your mortgage.

You won’t be in a rush to sell the house if it turns out that you have a long-term problem that prevents you from making mortgage payments permanently because your emergency fund should be enough to cover the costs until you have time to do so.

2. To be ready for home maintenance and repair costs.

One of the major drawbacks of homeownership is the fact that you no longer have a landlord who takes care of the repairs and upkeep of your home. It’s now up to you to be responsible for the regular maintenance jobs to keep your house in good shape. You also have to fit the bill if anything breaks.

Most home repairs can’t be avoided and could be unexpectedly pricey and require immediate attention. For example, if your roof develops a leak and water is pouring during the country’s rainy (and typhoon!) season, you would need to pay for a fix right away.

With your emergency fund secured, you may avoid going into debt or having trouble coming up with the money to cover these unforeseen expenses. Over time, it may be preferable to build a home maintenance fund to cover these repair costs.

In conclusion, buying a house will be a good financial choice that pays off in the long run if you have an emergency fund to protect your home so you don’t end up unable to make payments on it.