1. Are you financially prepared?

If you can answer yes to all of these questions, you’re probably in a good place financially:

Do you have good credit (680 or higher)?
Do you have a hefty amount in your savings?
Do you have additional savings for a down payment?
Is your amount of debt low?
Do you have a stable job and income?

2. Are you planning to stick around for a while?

How long do you plan to live in your next home? If you intend to stay for more than four years, the payoff of buying a home might be worth it for you. If it’s less than four years, you may want to continue renting because it’s not easy or inexpensive to relocate. Fees and costs associated with selling a home, such as realtor fees, appraisal fees, title insurance, mortgage origination fees and closing costs may not pay off in the short term.

3. Do you feel like you're wasting your money paying your rent?

Would you rather pay a monthly fee toward something you get to keep or something you have to give back? Obviously, we would all choose to pay for something we get to keep, but renting versus buying isn’t always comparing apples to apples. The pros of buying a home – you build your equity, work your way toward owning your home and enhance your financial portfolio, which is great for the long run. The cons of buying a home – there are fees on top of your monthly mortgage such as property taxes, home maintenance and homeowner’s insurance, which can add up quickly if you’re already on a tight budget.

4. What is the home price to home rent cost ratio?

A good rule of thumb when it comes to deciding whether to rent or buy is to use the price-to-rent ratio. Divide the home value by the annual rent amount. If you get a number that’s lower than 20, buying might be your best option. If you get a number higher than 20, you may want to stick with renting. Here’s an example when comparing a home valued at $200,000 or a condo that’s renting for $1,200 a month.

$1,200 × 12 = $14,400 (the annual rent amount)

$200,000 ÷ $14,400 = 13.8

In this instance, buying a home is probably the best option. Of course, you still need to take into account lots of personal circumstances to decide what’s best for you and your situation.

5. What features are most important to you in a home?

After you’ve decided whether or not you’re prepared financially to buy a home, you should consider the other aspects of home ownership that are important to you. Would you like to have a big yard? Do you want to be near the hustle and bustle of the downtown scene? Would you like a pool and other amenities? Is it important to be near a good school district?