Home Ownership - Are You Ready?

Home ownership means you no longer pay monthly rent for the roof over your head. Now you own it, and most of what's under it too. You can do what you want with your house (within reason of course). When you leave, you can sell it to recoup the purchase price and — with a little luck — earn a profit too.

But like most good things in life, home ownership comes with a list of disadvantages, responsibilities and downright headaches. In fact, it's probably the second biggest financial commitment most people ever make — the biggest being children. So before going any further, consider whether your lifestyle and finances make homebuying a smart move.

Let's start with lifestyle.  Except in a roaring real estate market, it usually doesn't make sense to buy a home you'll own for less than three or four years. Reason: the high transaction cost of buying and selling property means you could lose money on the deal. If you do make money on the deal, you'll pay capital gains taxes if you're in the house less than two years.

So ask yourself if you can really stay put for that long. Will you need to move because you are transferred by your current employer or a new one? Are you thinking of going back to school? Will your income remain steady or grow, or is it likely to decrease?

Some more mundane, but equally important, questions: Do you want to call the plumber and pay for his services every time a pipe leaks? Or would you rather leave it to the landlord to fix the plumbing, paint the walls, patch the roof and buy a new refrigerator? There's nothing wrong with that.

On the financial side, one key question is whether it costs more, on average, to rent or own in your area. If you want to calculate this out on your own, the rule of thumb is that if you pay 35 percent less in rent than you would for owning — including the monthly mortgage, property taxes and any homeowner's fees — then it's smarter to keep renting.

Ask your real estate or rental agent to help you figure out whether now is the right time for you to consider owning, instead of renting.