Buying a new home or refinancing your current one is exciting – and scary, when you think about the new debt you’ve taken on. One thing nobody wants to consider is the possibility of defaulting on a mortgage. But you don’t need to be worried, because there are things you can do now, beyond just paying your mortgage on time, to set yourself up for success and avoid defaulting.
Keep an Eye on Your Credit
People often pay close attention to their finances and credit score while looking for a home, but sometimes they stop once they buy a house. Consistently monitoring your credit with a free service like QLCredit can help you see what’s affecting your credit and how so you can take action to keep your score high, and it can help you catch any fraud or identity theft quickly.
Maintain (or Start) a Savings Account
Bankrate’s latest Money Pulse survey found that only 41% of Americans would pay an unexpected cost with funds from a savings account. The other 59% would have to come up with emergency money some other way like their 401(k), credit cards or a home equity loan. To be part of the 41%, Bankrate says, you need to work a regular emergency savings contribution into your monthly budget.
Personal money-management expert Dave Ramsey teaches a similar philosophy in his 7 Baby Steps to Financial Peace. Step 1 is save $1,000 as fast as you can in order to prepare for emergencies.
Use a Budgeting App
If you Google terms like “monthly budget” or “family budget,” you’ll find a variety of options for tracking a budget. Dave Ramsey promotes a zero-based budgeting model where you budget every cent of income and then track every expenditure. You can use his EveryDollar digital budgeting tool, Mint.com, or any of a number of other budgeting apps and tools. It’s also smart to sign up for recurring mortgage payments so you never forget about or fall behind on them.
Understand Your Escrow Account
Lastly, educate yourself on what your escrow account is and how it works. As we explain on our clients’ escrow page on MyQL, “Escrow accounts are a worry-free way to ensure that your insurance premiums and property taxes are paid on time and in full. Once a year, we analyze your account to make sure we’re collecting the appropriate amount of money. If we’re collecting too little or too much, we’ll adjust your payment to make up the difference.”
If your mortgage is with Quicken Loans, sign on to MyQL to view your escrow page and your personalized current and projected escrow numbers. If you don’t have a mortgage with us, visit this Zing Blog post to learn more about escrow.
Owning a home is exciting. Having a mortgage can be scary, but it doesn’t have to be. Take control of your mortgage and your finances now so that you won’t have to worry about them later. And remember, if you do find yourself with an emergency cost to pay, contact your mortgage company right away, even if you’re not falling behind on your mortgage, because there are a lot of different things your company may be able to do to help you manage debt.
How do you manage your budget and finances? Share your tips, tricks and questions below!
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Source: Home Loans