Could you afford your mortgage if you lost your job? Here’s how to stay prepared

Since President Donald Trump took office in January, tens of thousands of federal employees across the country have reportedly lost their jobs. On Monday, stocks continued the descent that started last week following the announcement of far-reaching tariffs on imported goods.

The federal funding available to help homeowners unable to make mortgage payments during the pandemic is a blurring memory; but housing counselors on Long Island still field calls from those struggling to keep their homes. When faced with the possibility of job loss, experts stress the importance of financial preparation and proactivity.

“What happens is, they’re under the impression that there’s something, or funds available, to help them,” said Stacey Krumholz, acting director of counseling for the Hauppauge-based Long Island Housing Partnership. “And the reality is, there’s no funds.”

With no financial assistance from federal, state or local government, homeowners who find themselves out of a job are in “a very precarious position,” said Janet Hoda, a U.S. Housing and Urban Development-certified counselor who works directly with default and foreclosure applicants through LIHP. Though the unemployment rate has hovered around 4% since May, according to an April release by the U.S. Bureau of Labor Statistics, economic uncertainty has come in the form of tariffs and stock market fluctuations.

Navigating the mortgage landscape in the wake of job loss involves strategy — especially if there is still equity in the property — according to housing counselors and financial advisers.

Krumholz, Hoda and their colleagues help homeowners fill out applications for forbearances or loan modifications from mortgage servicers. Counselors examine budgets, and offer resources for food and utility bill assistance. If a homeowner is many months behind on a mortgage, the partnership can provide the group names of attorneys who do pro bono work.

“You don’t want to go into a foreclosure, and hand that property back to the servicer, when you could have potentially walked away with assets to start over,” Hoda said.

Preparing in case you lose your job

Whether one is a homeowner or renter, employed or unemployed, financial advisers recommend proactively cultivating an emergency fund.

“An emergency fund doesn’t mean, ‘Hey, I want to go to Mexico, so it’s an emergency,’ and, ‘I want to go on vacation,'” said wealth adviser Larry Sprung, founder of Hauppauge-based Mitlin Financial. “It’s a fund that’s specifically set aside for things like job loss, unexpected home repair, unexpected car accident, things like that.”

Sprung and his colleagues work with families to determine how much money they need. A W-2 wage earner with relative job stability might save three months of expenses; a self-employed worker might want to put away enough money for nine months or more, he said.

Bryan Trugman, of Attitude Financial Advisors Inc., in Plainview, recommended the same. Typically, advisers recommend putting three, six, or nine months of expenses into a checking or savings account for emergencies, but the true amount depends on an individual’s circumstances.

If a mortgage payment is $3,000 a month and additional expenses cost another $3,000, Trugman offered, this means accounting for $6,000 of monthly expenses for three to six months. A three-month emergency fund would amount to $18,000; a six-month fund would total $36,000.

“And hopefully in that time you’ll find a new job,” Trugman said.

For most, saving this much money is not an easy ask, Trugman conceded.

“A significant amount of the population in the country,” he said, “would be in a lot of trouble and hot water if they lost their job.”

In March, the consumer financial services company Bankrate reported that more than one in three Americans had to use money from their emergency funds over the past year, according to its annual Emergency Savings Report, based on data from a survey of 1,000 respondents.

According to Bankrate, 29% of respondents did not have enough money saved to cover three months of their expenses. Approximately the same percentage of respondents had at least six months’ worth of expenses reserved.

Though it would not help in the case of a layoff, Trugman noted that having disability insurance would help if a homeowner or renter cannot work due to injury or illness.

To those who do not have emergency funds, Trugman recommends “setting a realistic goal,” like saving three to six months of living expenses, and putting away even $25 to $50 per paycheck.

“Automate transfers to a separate savings account to make it consistent and easier,” he added in an email.

Organizations that can help

Financial preparedness is important for those with and without steady employment, Sprung added.

“A lot of the concepts that we’re talking about are unfortunately things that should be done well in advance of potentially losing your job, or situations like that,” Sprung said.

As the president and CEO of Community Development Long Island, Gwen O’Shea encourages homeowners to call the organization’s home preservation counselors even if they are employed and have not fallen behind on mortgage payments.

CDCLI’s counselors and coaches can provide clarity on the resources that are available should someone find themselves in a challenging position in the future, O’Shea said.

“Especially right now, because I think there is so much uncertainty, whether we’re talking about interest rates, mortgages, reduction in jobs, increasing costs of everything, that having this information is really, really beneficial for Long Islanders,” she said.

O’Shea also recommends Long Islanders take advantage of CDCLI’s financial coaching, which is open to anyone regardless of whether they ever plan to own a home. For a $25 fee, which O’Shea said is waived or covered by an employer in certain cases, any individual can consult with a coach who can help explore ways to strengthen their financial position. In some cases, this can involve consolidating credit cards and strategizing to build good credit.

Once an issue arises, it becomes more difficult for an individual to think clearly, O’Shea noted.

“In that point of time, where obviously, you’re frazzled, it’s overwhelming, and so, making certain decisions in that type of state doesn’t always lead to the best outcomes,” O’Shea said.