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Keeping your home

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By Shirley Anderson-Porisch

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March 11, 2009

Even though many families have lost their homes, owning a home in the United States continues to be an important strategy to invest in the future and provide family financial stability and security. 

Estimates are that more than 90 percent of U.S. homeowners are current with their payments. So why did people lose homes and how can those who still have a home keep it? 

The first way to keep a home is to recognize the importance of home ownership. When I teach first time homebuyer workshops, the "cardinal" rule for their future is that each month the mortgage is the first payment of the month. It doesn't matter if you have an unexpected expense or are planning a special event, if you own a home, you always make the mortgage payment your priority. 

To keep and maintain your home, you need to make sound financial decisions for home expenses. People who lost their homes may have been facing monthly housing expenses that also exceeded the boundaries of their income. Studies of families who have gone through foreclosure suggest that when total monthly housing expenses exceed 40 percent of monthly net income, then there is typically not enough money left to cover other household expenses. 

Do your monthly housing expenses exceed your monthly net income? Too often when people think of housing expenses, they only think of the basics of the mortgage: principal, interest, taxes and insurance. It should also include electricity, heat, water, sewer, garbage, telephone, television, Internet, home maintenance and furniture or appliance payments. 

If you put more than 50 percent of net income into housing expenses, including mortgage, you may need to consider what impact that is having on other expenses and figure out if credit cards are how you are covering your bills. 

Look at your spending and compare income and expenses. A monthly spending plan will help you organize and control spending in all categories--housing, transportation, health, food, etc. 

Build savings for one or two mortgage payments, for housing emergencies or expenses from an insurance deduction, and save for future major purchases, such as appliances. Saving a nest egg will help you best deal with financial hard times and help you keep your home.

Shirley Anderson-Porisch works as a family resource management Extension educator at the University of Minnesota and is an expert in family finance. She has long been a media contributor and is an accredited financial counselor.