Making the Decision to Buy Your Own Home

You're writing out that monthly rent check again, and it sure is a good chunk of change. In fact, it's the largest bill you pay each month. You're starting to think that maybe it wouldn't hurt so much if the check you wrote each month ended up buying something besides a temporary roof over your head. Use the calculator below to get an idea of the price range you could afford if those monthly rent payments were home payments instead.

Financial Calculators Should you rent or should you buy your home? It takes more than looking at your mortgage payment to answer this question. Use this Rent vs. Buy Calculator to help you weed through the fees, taxes, and monthly payments to help you make a good financial decision. Click the "View Report" button for a detailed look at the results.

But are you ready to become a homeowner? Even if you can afford to purchase a home, whether that's the right step for you depends on a lot more than your financial situation. As a matter of fact, there are times in your life when it can be more advantageous to rent.

How settled are you? If you are thinking about buying your own place, a good question to ask yourself is how settled am I right now? Maybe you recently graduated from college and are living on your own for the first time. Perhaps you just moved to a new area to pursue a career and you're not sure how it's going to work out. Or your line of work may be the type that frequently takes you to new locations. Because of the huge expense involved in purchasing a home--the down payment, closing costs, attorney's fees and the like--it will be difficult for you to recoup these costs if you end up selling your home after a short stay.

On the other hand, let's say you've started your own business in the town you grew up in and it's going strong. Or let's say you are married and you and your spouse both have promising careers at work. Are children in your near-future? Maybe you need to move because you and your family are outgrowing the space you're renting. All of these are reasons for at least thinking about buying a home.

It's difficult to know exactly how long you will need to live in a home to recoup your initial expenditures and be able to breakeven or make a profit when or if you decide to sell. However, a very general rule of thumb is that you need to stay in a home for five years before it is advantageous to sell. And, don't forget that real estate doesn't always appreciate. The risk that property will lose value is very real, as is demonstrated by the recent housing economic crisis. In addition, local factors, such as undesirable development, can also negatively impact a home's value.

Tip While five years has been the accepted length of time that allows you to at least recoup your mortgage interest and expenses and maybe even make a profit when you sell your home, the exceptions to this rule are many. You may have enough saved up or an inheritance that enables you to purchase a home without a mortgage. Or maybe you bought a home in an area where the home values went through the roof for whatever reason. Perhaps you are really handy and have turned a run-down dump into a dream home at minimal cost. We offer the general rule as guidance if you're thinking about buying a home.

Go with your gut. Finally, we'd like to urge you to consider the most important factor in the decision of whether home ownership is right for you--how you feel about owning a home. Buying a home is one of the major life decisions you make. If everything you have considered points to purchasing a home, but you feel you don't want to take that step, then don't. Whether owning a home represents something you're not ready for, a loss of mobility, a financial weight, or simply a whole mindset you're not into, we urge you take these feelings into consideration and dismiss them only if you are comfortable with your decision. On the other side of the coin, if at first glance you don't seem to be the ideal candidate for home ownership, but it is something you truly feel ready for, please don't resign yourself to renting without giving serious consideration to whether your desire for home ownership means it's the right step for you.