Can you handle the monthly expense? While a monthly mortgage payment may be comparable in some cases to a monthly rent, there are other expenses to consider.
To get a feel for the financial burden you'll be taking on and to see if you can handle it---"practice" making payments. Each month, set aside projected mortgage and property-tax payments, maintenance costs, utilities and any other home-related expenses into a separate savings account, says Gary Smola, a certified financial planner with financial-educational firm Financial Finesse.
What's the price-to-rent ratio? "Home prices have come down significantly in some areas of the country, but nobody knows what tomorrow's going to bring in the housing market," says Daniel Morris, a certified public accountant in San Jose, Calif.
To determine whether it makes more financial sence to buy or rent in your area, compare home sales prices with the cost of renting a similar place.
Divide the price of the home by the total cost of rent for one year. If the result is more than 20, "I'd be very concerned that the price (of the home ) might fall more" says Mr. Baker, and you should consider waiting to buy. If it's 15 or below, he says, "you're probably reasonably safe with prices holding steady or growing.
What is your job and relationship status? Twenty somethings are still getting a grasp on their futures and a constantly changing lifestyle might require the flexibility of renting.
"But if your career stability is strong, you are comfortable doing what you're doing and you are committed in some form to your lifestyle, "Mr. Morris says, "buying a home becomes a more attractive option."