How To Keep Your Home When Your Income Drops

Homeownership is the American dream for many, but it comes with the responsibility of making monthly mortgage payments. But when your income changes, that can have a ripple effect on your finances.

There are ways to prepare for a sudden change in monthly finances as any economic uncertainty becomes a reality.

The U.S. unemployment rate increased to 4.4% in February, which is up from 4.3% the prior month, according to the Bureau of Labor Statistics' most recent unemployment numbers.

The weaker-than-expected report showed that nonfarm payrolls decreased by 92,000. The report follows a major downward revision to prior months: January’s surprise gain was trimmed to 126,000, while December's modest growth was erased entirely, falling from a gain of 48,000 to a loss of 17,000.

That's why adjusting your budget now can alleviate some of the worry over how to keep your home when your income drops.

Chad Cummings, certified public accountant and attorney with Cummings & Cummings Law, tells Realtor.com® that it's wise to cut out any discretionary spending now. This includes not dining out as often and holding off on any big vacations.

How much in cash reserves do you need?

Aside from regular savings, building a solid cash reserve is important so that you're able to tap into that money should your regular source of income stop coming in.

Cummings suggests having enough cash for at least 90 days (three months) to cover housing, food, and even fuel.

"Do not finance routine purchases at current credit card rates," says Cummings.

The average annual percentage rate (APR) for all credit card accounts in the fourth quarter of 2025 was 20.97%, according to LendingTree. Keep in mind, APRs will vary based on the type of credit card you have and the terms of the credit line secured with that financial institution.

If you've signed up for a new credit card, sometimes offers may include 0% APR, but beware of the fine print and when the APR will increase, because 0% financing usually lasts only a year.

How to make a budget

Itemizing how much money you spend monthly will allow you to understand how much to set aside and how much you can cut.

A good budget will show your earnings and how you spend your money. Consumer.gov suggests the following steps:

• Make a list of your bills and other expenses, and what you're paying. Bills include things like rent, electricity, water, or phone service. Expenses are things you spend money on, including food, gas, clothes, and entertainment.
• Next, write down your income for the month. Your pay stub will show exactly how much you bring in. You can also include any other money you get, like child support.
• Once you have outlined the two parts, you want to subtract your monthly bills and expenses from how much money you make in a month. This number should be more than zero.

If the number is less than zero, you’re spending more money than you make, and that means it's time to look for things in your budget you can change.

With the uncertainty in the world causing rising costs for necessities like food and fuel, it's best to begin budgeting now to ensure you can cover your expenses later, such as housing, if you have a change in income.

Aside from scaling back on expenses, Cummings advises not spending any IRS tax refund if you are anticipating one.

"Even if the [Middle East] hostilities cease tomorrow, the economic aftershocks will follow for at least 6 to 12 months," Cummings says. "If you received a refund in 2026 for the 2025 tax year, use it to build your emergency fund and then pay down debt. Now is the time to be frugal."