Renting a place to live gives you the freedom to move when you want, with none of the responsibilities of homeownership. But at some point, most people yearn for their own home. Buying a house is a good way to start building financial security. As you pay down the mortgage, you build up home equity, which is a valuable financial resource.

Of course, home prices have gone crazy in the last two years. While the housing market is starting to cool down, as of autumn 2022, sharply rising interest rates mean — even with slightly calmer prices and fewer bidding wars — homeownership isn’t easy. In particular, you may not be able to afford a mortgage.

“Now that mortgage interest rates have been on an upward trek, coupled with the sustained and substantial surge in home prices across the country, housing affordability is a challenge for many prospective homeowners,” says Mark Hamrick, senior economic analyst for Bankrate. “But the fact remains that it pays to shop around for the best mortgage interest rate when the time does come to buy,” he adds. “All too many buyers only focus on the price of the home when there are other factors that also help to determine monthly payments.”

8 signs you can buy a house

If you frequently find yourself wondering, “Should I buy a house?” you’re not alone. Deciding whether to rent or buy a home is a major decision. Here are eight signs that you’re ready to make the switch from renter to homeowner.

1. Your rent is rising

Rental prices are rising significantly nationwide, according to, which tracks trends in the rental market. In 2022, the average rent on a one-bedroom unit climbed 27.13 percent to $1,721 year-over-year. Two-bedroom units rose 23.43 percent to $2,054.

Rising rent makes it harder to budget for monthly housing costs and to save for other financial goals. When paying rent begins to feel like a bad investment and you want to build equity for the future, it’s time to think about mortgage loans, says Bill Golden, a sales associate with RE/MAX Around Atlanta, who has more than 30 years of real estate experience.

Golden says many renters are ready to buy a home once they are financially stable. Many are motivated by the pride of ownership and wanting more control over their dwelling place.

“If one or more of those is tugging at your heart, at least look into the possibility of owning rather than renting,” Golden says. “If you’ve seen your rent escalate significantly but you feel trapped renting, the balance may be tipping toward buying. With today’s escalating rental rates … chances are your monthly outlay could be less on a purchase than on a rental.” Or at least, comparable (and don’t forget that part of your mortgage payment can be tax-deductible).

2. Your credit score is solid

Some renters can’t make the leap to homeownership because they can’t qualify for a mortgage. Low credit scores are a common reason why. A history of late payments or too much debt will hurt your score. One sign that you’re ready to buy a home is having a healthier credit score, says Bruce McClary, senior vice president of communications for the National Foundation for Credit Counseling in Washington, D.C.

Although borrowers with a credit score as low as 500 can qualify for some home loans, they will be required to make bigger down payments and pay higher rates. A good credit score gets you better interest rates and loan terms.

“Establishing a credit history or recovering from a credit setback can take time, but the goal of homeownership is still realistic under those circumstances,” McClary says. “Receiving help from a nonprofit housing counseling agency that also offers credit counseling programs can make a big difference for anyone struggling with those barriers to homeownership.”

Before you apply for a mortgage, get a free copy of your credit report.

3. Your debt is manageable

Another thing lenders look at when screening mortgage applicants is their debt-to-income ratio, or DTI. This is a key metric that’s calculated by adding up all monthly debts, then dividing the sum by your gross monthly income. The higher your DTI ratio, the more risk you pose to a lender. Use our DTI calculator to figure out yours.

Some conventional loans allow a DTI ratio of up to 50 percent, but many lenders prefer a ratio of no more than 43 percent. If you previously had a high DTI ratio and have since paid off some high balances, you’ll be in a stronger position to get a mortgage.

A lower DTI will also allow more wiggle room in your budget to put money into an emergency fund for home repairs and other unexpected expenses.

“Keeping credit card balances low and debt under control is beneficial in many ways,” McClary says. “Keeping your balances at or below 30 percent of the available credit limit has a positive influence on the credit score.”

4. You can afford a down payment

“First-time homebuyers don’t have proceeds from another home to help fund a down payment. It’s one of the main reasons why the down payment is the biggest hurdle to homeownership,” says Rob Chrane, CEO of Atlanta-based Down Payment Resource, which finds programs that help people buy homes.

Down payment requirements typically depend on the type of home loan you get. For conventional loans, 20 percent down is usually required if you want to avoid paying private mortgage insurance. Some mortgages insured by the Federal Housing Administration, known as FHA loans, require just 3.5 percent down. Fannie Mae and Freddie Mac back some mortgage products that require just 3 percent down; and loans guaranteed by the U.S. Department of Veterans Affairs and the U.S. Department of Agriculture (USDA) require no down payment at all.

Renters interested in buying a home should compare different loan programs to see which one is best for them. In addition, there are grants and programs to help homebuyers with down payments. “There is a wide range of programs for homebuyers today. We track more than 2,500 homeownership programs across the country administered by federal, state, county or local government agencies, nonprofits and employers,” says Chrane.

Another expense buyers should be ready for is closing costs, which typically equal 2 percent to 7 percent of a property’s sale price. The good news is that some closing costs are negotiable.

“Because buyers are putting so much of what they have into the down payment, we usually try to get the seller to pay some, if not all, of the closing costs,” Golden says. “Even if [the buyers] have to pay a little more for the house, it doesn’t hurt their pocket as much.”

5. You have enough set aside for maintenance costs

When a pipe bursts or the air conditioner goes out in a rental unit, you don’t have to worry about paying for it. (That’s the landlord’s responsibility.) The same goes for property taxes, routine maintenance expenses and homeowners insurance.

That’s not the case when you own a home — when you do, all those costs are your responsibility. If your income has risen or you’ve been able to set aside savings, you might realize you have enough extra money to handle the added expenses of homeownership.

“If you put everything you have into the down payment to buy a house, then you have no money left to do repairs should they come up,” Golden says. “You’re better off spending less on the house so you have some money to make improvements and repairs.”

Routine maintenance expenses can come to $3,000 annually. Replacing big ticket items like your roof or a new HVAC system can cost you over $10,000 each. Smaller items like plumbing and electrical issues or replacing an appliance may not cost as much but still add up over time. And of course, you need insurance coverage — figure on at least $1,300 in yearly premiums.

6. You’re going through a major life change

Many renters decide to purchase a home after a major life event, such as getting married, says Henry Yoshida, a certified financial planner and CEO of Rocket Dollar, a Texas-based provider of self-directed retirement accounts. A growing family, a new job and children leaving the nest are other common catalysts for people to buy a home.

“The four major cities in my home state, Texas, are simultaneously on top 10 lists for raising a family and retiring, so I see this firsthand,” Yoshida says. “My own neighbors on either side are retirees from California and a young family who relocated from the Northeast for a job.”

7. Your lifestyle is stable

Buying a home involves a lot of upfront costs that can take a few years to recoup, so if you anticipate moving before you can recover those expenses, homeownership might not be right for you right now.

Few people work at the same company for decades anymore, but a renter who is ready to buy a house should have job security, says Hamrick. A stable job means stable income, which lowers the risk that you will stop making your mortgage payments and default on the loan.

“For two-income households, obviously the risk and opportunity are twice that of situations where there’s just one wage earner,” Hamrick says. “In a perfect world, buyers would buy a home well beneath their means so they aren’t devoting so much of their income to the mortgage and other related costs.”

8. You know what you want

It’s smart to have a good idea of the area or neighborhood you want to live in and the type of home you want before you begin your quest. Houses, townhouses, condos, co-ops, duplexes — there are lots of options out there, and each one has its own considerations for costs, upkeep and personal enjoyment. If you buy a condo, for example, you won’t have to do the yardwork, but in addition to your mortgage payments, you must be able to afford the monthly homeowners association fees, aka carrying charges.

Determine what you need and what is most important to you. Is it being near a good school or within walking distance of your job? Do you mind navigating stairs or having neighbors living above you? Do you want lots of amenities?

If you’ve moved to a new city or state to take a job, it might be a good idea to rent until you’ve familiarized yourself with the area. That way, you are more likely to choose a home and neighborhood you’d like to settle in.

Next steps

Ready to leave renting behind? Before you start looking at homes for sale, shop around, compare lenders and get preapproved for a mortgage. Preapproval helps you know how much house you can afford and what loan program is best for your situation, says Ben Creamer, principal and managing broker of Downtown Realty Company in Chicago.

“This sets a realistic expectation for what the buyer is qualified to purchase, as well as what financial resources will be needed for closing,” Creamer says. “Knowing this upfront allows sufficient time to save and test the budget constraints.”

Choose a fixed-rate loan for 15 or 30 years if you want predictable, stable mortgage payments. However, don’t forget that owning a home involves a lot more than the monthly principal and interest payments for a mortgage. Property taxes, homeowners insurance and private mortgage insurance are additional expenses that can increase your monthly payments over time. Then there are repairs, maintenance and utility costs to budget for, too.

As you weigh the decision to buy a home, make sure you can still reach your other financial goals, Hamrick says. A new mortgage shouldn’t prevent you from paying down student loans or credit cards, or from saving for retirement.

“In order for (buyers) to have a good chance of achieving a range of financial objectives, they should also have emergency savings,” Hamrick says. “That’s because of the inevitable expenses associated with homeownership.”