You're thinking about buying a home. Perhaps you've been renting for a few years, and are tired of making rental payments without getting anything back. Perhaps you've heard friends or family members discuss the joys of homeownership, and it sounds like fun to you. Perhaps you've got an itch to make a place all yours - decorated exactly as you want it, not as your landlord prefers. Or perhaps you're thinking about starting a family, and want your children to grow up in a home of their own.

There are many reasons people decide to become homeowners, and - in the right circumstances - it may be a good idea. Owning a home is neither simple, nor inexpensive, however. Before taking the plunge into homeownership, you should understand the advantages inherent in both renting and owning your home.

Advantages of Renting:

Freedom/Mobility

Generally Less Expensive…Without the Shadow of Foreclosure

No Down Payment, and Limited Upfront Costs

Got a problem? Call the Landlord!

Advantages of Buying:

Build Long-Term Equity

Stable Housing Costs

Good Investment

Tax Savings

It's Yours!

So, when you're considering whether or not to buy a home, you should ask yourself: do you plan to stay put for a while? Is your job secure? Can you take on the additional financial burden associated with homeownership? Do you really feel that you can handle the upkeep and maintenance of your home? Do you have sufficient funds for a down payment? If you answer "no" to some or all of these questions, perhaps you should reconsider whether this is the right time for you to own a home. If your answer is a resounding "yes," however, then you may be the perfect time for you to join the ranks of happy homeowners.

Not so a mortgage. A mortgage is a 30-year commitment - not to be taken lightly - and you can't move as easily. If you anticipate wanting to move within a couple of years, this probably isn't the right time to buy a home.

Generally Less Expensive…Without the Shadow of Foreclosure: Housing payments are almost always more for homeowners than for renters. Even if your mortgage payments are less than what you'd been paying in rent, there's an array of additional costs: property taxes, homeowners insurance, utilities, upkeep expenses, and more. And there's no flexibility when you own a home; if you don't pay your mortgage, you lose your home to foreclosure. It's that simple.

So, if you're struggling with making your rent payments, you might want to think twice about taking on the additional financial burdens of homeownership.

No Down Payment, and Limited Upfront Costs: While landlords typically require a renters' deposit before the renter moves into a home or apartment (often equivalent to 1-2 month's rent), the upfront costs of renting are minimal.

Buying a home, on the other hand, requires significant upfront costs. First, there's the down payment, typically between 5% and 20% of the cost of the home. There are also a number of closing costs - which cover the legal transfer of a property to your name - and other costs of taking out a mortgage. Closing costs typically range from 3% to 6% of the cost of the home. If you're looking at a home that costs $100,000, you'll be expected to make a down payment of between $5000 - $20,000, and pay closing costs of between $3,000 - $6000. In other words, your upfront costs are between $8,000 - $26,000 - significantly more than a rental deposit!

Got a problem? Call the Landlord! As a renter, who does the repairs? If your furnace malfunctions, or if your toilet backs up, who fixes it? That's right: your landlord does. That's a big advantage of renting - all of those home-related tasks are ultimately someone else's responsibility.

As a homeowner, though, it's your responsibility. When the disposal breaks, it's up to you to get it fixed. If your basement floods, you're the one who has to deal with it. Certainly, you can call a professional to deal with the problem…but when the bill arrives, you're the one who pays. And that's no small matter; experts generally estimate that you should plan to spend 1% of the purchase price of your home doing maintenance and repair.

There's one exception to this rule: condominiums. Typically, condominiums allow you to own a home without taking on the full burden of repair and maintenance responsibilities (often, condominium dues are contributed to a general maintenance fund). That's one of the main reasons that condominiums are so popular these days.

As a homeowner, on the other hand, a portion of your monthly mortgage payments will go toward building equity in your home. With every mortgage payment, you own a little more of your home - so it's sort of as though you're paying rent to yourself! In time, you'll be able to borrow against this equity, or convert it to cash when you sell the home.

Stable Housing Costs: If you've rented for any significant period of time, you've probably noticed that rents increase with time. Whether they rise in small or large increments, they almost always go up - year after year.

With mortgages, however, you can "lock in" a fixed monthly payment. When you take out a mortgage, you and the lender agree on a monthly payment, and those payments remain stable for the entire repayment period (unless you take out an adjustable rate mortgage, in which case the payments will remain fixed for a specific period of time, agreed upon by you and the lender, before being adjusted). In fact, as the value of the dollar rises, it's almost as if you're paying "less" as time goes on!

Good Investment: Home values typically increase with time, making real estate a generally good investment. A home you purchase today might be worth considerably more in ten or fifteen years.

Of course, it's not a guarantee that your home will increase in value; like any investment, you can gain money, or lose money on the deal. Certainly, there are stories of people who purchased homes just before their local economy bottomed-out…and who lost money in the process. If you suspect that your local economy, and local real estate prices are not sustainable, you might want to reconsider your long-term investment in real estate. However, if you see no reason that housing prices should drop in the future, buying a home might be a very good investment, indeed.

Tax Savings: Owning a home carries significant tax benefits. Most notably, you can deduct the interest you pay on your mortgage, up to $1 million! For married taxpapers filing separately, the maximums are halved. In addition, you can deduct "points" (lenders' fees), some of the interest you pay on a home equity loan, the interest on home improvement loans, property taxes, and the costs of a home office if part of the home is used for business purposes. When it comes time to sell your home, you can deduct all selling costs - brokers' commissions, title insurance, legal fees, administrative costs, etc. Not to mention, you get to keep, tax free, up to $500,000 in profit on the sale of a home that was used as your principal residences for two of the last five years.

Be aware, though, that the IRS offers standard deductions - to both renters and owners. For a married couple, filing jointly in the 28% tax bracket, the standard deduction is $7,350. It's worthwhile to itemize your deductions (thereby taking advantage of the above tax benefits) only if these deductions add up to more than the standard deduction. For more about these tax benefits, visit the IRS web site at http://www.irs.gov