How to know you’re ready to buy a house

Being a homeowner is a lifestyle change that comes with a lot more responsibility. Taking care of your property and extra costs are part of the deal. But the perks of being the primary decision-maker may make it all worthwhile:

• Control over your living space. When you own your own home, that space becomes yours entirely. You can paint the walls orange—you can knock the walls down if you really want to.
• Ability to make a neighborhood your home. Owning a house allows you to plant some roots and make connections. Because you control how long you’ll stay there, you can settle into a neighborhood and not worry about your landlord selling or charging more rent than you can afford.
• Building equity. Paying your mortgage might feel similar to paying rent, but it’s not. Every month, a little more of that home becomes your financial asset. This is called building equity in your house. Once that equity is built up enough, it boosts your wealth and creditworthiness.
• More predictable housing costs. Rent can fluctuate, but a fixed-rate mortgage makes your housing costs more predictable. Improved home value, property taxes, and insurance rates can affect that payment some, but typically less than a spontaneous rent hike.

There are more than a few things to consider when deciding if you can really afford a house. Online mortgage calculators are a good start, but there are other costs to factor in, too. For example, you’ll need money for your down payment and closing costs. Most people put anywhere from 5 to 20 percent down, and at closing, you can expect to spend about 2 to 5 percent of the home sale price.

Also, consider monthly payments and ongoing costs. In addition to the principal and interest for your mortgage, you’ll have homeowner’s insurance, property taxes, mortgage insurance, and sometimes homeowners association fees. Repairs and maintenance will vary widely, but you can expect to spend around 1 percent of the home sale price every year—and more if it’s a fixer-upper.

We break down these costs more for you in our next guide, here.

Even with all that info, it can be tough to do a side-by-side comparison of home ownership costs with your current rental costs. This handy rent-vs.-buy calculator can make it easier.

If you’re at the point of wondering, “Should I buy a house or rent?” credit is a big thing to consider. Depending on your score, you may want to wait and work on repairing your credit before deciding you’re ready to buy. The extra time could save you big.

Your credit score can determine both if you qualify for a mortgage and how much you’ll pay for it. A great credit score of, say 790, will likely earn a low mortgage rate. You might get a mortgage with a 600 score, but your interest will likely be high, which could cost you tens of thousands of dollars more over the years (depending on the size of your mortgage, of course).

And here’s a tip: Some organizations can help you buy a home with lower credit. Check out FHA, USDA, or VA mortgages to see if you can get a good deal.

When you own a home, you’re committing to living in one location for a while. In a recent Trulia survey, we found that five out of six respondents said finding the right neighborhood was equally if not more important than finding the right house. They said they’d give up home features—like pools, storage space, a garage, or a yard—in exchange for a great neighborhood.

It makes sense: Homeowner happiness relies so much on where that home is. A great way to find out what it’s like to live somewhere before you commit is reviewing What Locals Say reviews on Trulia. Millions of residents have shared their firsthand experiences of living in their neighborhoods, helping you find the best fit. When you find a place you can’t wait to call home—you’re ready to start looking for homes there.

Home ownership is such a part of American culture that people just assume that it’s the smartest financial decision—and for many people, it is. But whether or not you should buy a house or rent depends on where you live. With rising housing prices, in some cities it’s actually cheaper to hand your landlord a check each month than it is to pay all of the home ownership costs we mentioned above. And experts have also found that once inflation is accounted for, many people don’t even end up making much profit when they sell. That doesn’t make home ownership a bad deal—far from it. It just means your reason for buying should be about wanting to be a homeowner, not about what will happen when you sell.