So you think you're ready to become your own landlord - ready to put down some roots in a community and build your own personal nest egg. There's no doubt owning a home has many advantages. Yet, this great financial asset also comes with weighty responsibilities. It's a good idea to think carefully about renting vs. buying before taking the plunge.
"People really need to understand the steps that go in to homeownership," says Linda Sherry, Washington D.C.-based director of Consumer Action, which operates a nationwide Housing Information Project.

Renting is often the first step. In fact, whether home ownership is just around the corner, or a year or two down the road, renting is an ideal way to prepare for buying. This "preparation" may include setting aside money each month for a down payment and researching the type of house you can afford in your area.

Next, think seriously about how long you plan to be in a particular place. If you're eyeing that job transfer across town, purchasing a house may be a smart move. But if you have your heart set on moving closer to family across the country, your best bet is to continue renting until you are ready to settle in for three to five years. "People who think they may be moving in the short term - even in the future as far away as four years - would be best served to rent," advises Sherry. That's because your house needs time to appreciate in order to cover substantial up front expenses such as closing costs and agent fees.

Of course, the cost of housing is something to keep in mind. Once you have a handle on what housing costs in your area, sit down with an online calculator, which allows you to enter the price of a home and prevailing interest rates, to see what your monthly mortgage payment might run.

Depending on the housing market where you live, the mortgage payment may be similar to what you pay in rent each month. Don't forget, however, to budget extra monthly expenses for insurance, property taxes and maintenance.

"There's no doubt there are costs, and sometimes hefty ones, for owning versus renting," Sherry emphasizes. "You have to be prepared to fix things that don't work in a house. Those are costs that you wouldn't encounter as a renter."

That said, for the majority of people owning a house is the single greatest source of financial security and independence. "It's hard to see any other way they can make 10 to 30 percent of appreciation or even more," she says. "It is an opportunity to build wealth." It's also an opportunity to save on taxes. That's because you can deduct the interest on your mortgage and property taxes when you file your federal tax returns.

And in the end, you'll own it. You can paint the walls whichever color you choose and, more importantly, you can pass your house down to your children creating security for generations to come.

But before all that, sit down with pen and paper. Look at what you earn, and how reliable your income is. Says Sherry: "You have to get into a deal that's reasonable for you."

Source Inman