My first financial goal that I need to meet in 2011 is to build an emergency fund for myself. My plans to buy a house would completely derail this fund, as I would need to use all of my cash, plus cash in my mutual funds, in order to pay closing costs and buy appliances, etc.

I recently read this article, about how only a little over half of Americans have more in their emergency funds than the balance of their credit card debt. The article doesn’t say, of the Americans with more money in their funds than they owe in credit cards, whether these emergency funds are even sufficient to cover emergencies. A $500 fund is not going to cut it if you have to get some major car repairs in order to keep your car running and get to work.

Personally, my credit caard debt right this minute is about $1,000 ($600 is reimburseable expenses from work), and my cash balance is about $4,000, so at least I am breaking even there. However, my funds available for “emergencies” is still not as high as I’d like.

Right now, my rent is only $325/month, I don’t have a family to support or pay medical bills for, I have parents that I could move back in with on short notice if I lost my job. So, I would be fine with an emergency fund of $5,000 or $6,000.

If I owned a house, not only would the purchase use up all of my cash, but I would really require a larger emergency fund to cover the new emergencies I could be responsible for as a homeowner, such as leaking pipes or a broken A/C.

So, the only reason I would consider buying a home now is that interest rates are so favorable, plus I have parents that could bail me out if I needed a short term loan to cover costs like that. I was also planning on having renters pay me enough to make my portion of the monthly mortgage payment even less than my rent now. Still, it’s a scary idea because it risks such a lot of money.

The conclusion is that I am pausing the house hunt for now, and I’m going back to building my emergency fund and paying off my student loans as quickly as possible. The house idea is not off the table, but I think that these lower rates will be around for awhile yet (famous last words?) and I don’t need to rush into anything now just because I can get a mortgage for below 5%. (But it’s so tempting!)

Plus, my roommate is planning on buying the house we are renting now, which should lead to all kinds of improvements in our living situation - like a heating system that works more efficiently, and actually keeps us warm.