Owning your own home is the American Dream, but don't jump into such a major commitment before you're ready. With careful consideration, you can decide whether it is best for you to buy or rent a home.
Step 1: Think about how long you plan to stay in your home Think about how many years you plan on staying in your home. If you aren't sure that you'll be in the home for at least 3 years, you'll likely be better off renting than buying.
Step 2: Determine what you have available for down payment Check your available savings to see how much money you have available for a down payment. If your available down payment is less than 20 percent of the purchase price, you'll likely have higher monthly payments, and renting may be a better option -- at least until you can save more money.
TIP: Be sure that you have enough to cover closing costs and real estate agent fees in addition to the purchase price when buying a new home.
Step 3: Think about whether you can handle accidentals Think about whether you have skills or enough money to handle incidental repairs like a broken air conditioner or clogged plumbing. Renting means that these responsibilities are the landlord's; when you buy, the responsibility is all yours.
Step 4: Compare the rent ratio Compare the rent ratio by dividing the purchase price of a new home by the annual cost of renting a home. Consider buying if the ratio falls below 20. Consider renting if the ratio is above 20.
Step 5: Calculate tax breaks from buying a home Calculate the tax breaks that you would receive from buying your home by estimating how much interest you would pay on a mortgage and how much property tax you would pay within a year. Determine whether this break is large enough to warrant buying a home.
TIP: Determine whether the tax deduction for purchasing your home exceeds the standard deduction that everyone -- including renters -- is allowed to take.
Step 6: Decide if you're mentally ready Decide if you're mentally ready to commit to a large, long-term purchase. Buying a home means that you can't pack up and move whenever you want. If you're ready for this commitment, and your finances are all in line, it might be time to find an agent and start shopping for your dream home.
FACT: The White House features 132 rooms, 35 bathrooms, and 6 levels in the residence area.