Whether you’re a renter wondering if you’re ready to take the leap into homeownership or a homeowner wondering what your next living situation will look like, the question of “Does it make more sense for me to rent or buy a home?” often arises. Your friends are buying houses. Your dog wants a yard. Your kids want a playground. Working from home makes you want a home office. The questions are, can you afford to buy and does it make sense for you?

Let’s explore some of the things you need to consider before taking the plunge into homeownership.

1. Location

The most important consideration in real estate has always been “location, location, location” and this holds true when you’re deciding between renting and buying. If you’re in a high-priced real estate market, it’s possible renting is the only affordable option. If the market you’re searching in allows for the option to buy, there are some things you need to consider – Does the area feel safe? If you have kids, are the schools good? Does the commute to work make sense? Are you located close to the things you care about – shopping, dining, public transportation, outdoor activities? If you can check off all those items that are important, then you need to consider if you can see yourself living there for more than three to five years. If you’re not crazy about where you live, why buy a house there?

2. Lifestyle

Picture yourself living your absolute best life. Within that picture, there are certain intangible things that will play into your decision of buying versus renting. If you want a feeling of stability and security, having a landlord that could end your lease or dramatically raise your rent may not be for you. If you like the freedom to make drastic changes to your home and make it feel like yours, buying a home and taking on those renovations may be a better fit. Take it one step further by buying a new construction home and have the ability to customize it from day one. If you prefer a maintenance-free lifestyle, having a landlord that is responsible for those big-ticket repairs is one less thing to worry about. If financial stability is a major concern, having a fixed-rate mortgage and home equity to borrow against if needed can help reduce your stress. Finances aside, there are certain feelings that may dictate the choice you make.

It’s also important to think about your current life situation and what will be the same and what could potentially change in the next few years. Let’s say you and your long-term partner are recently married and still figuring out how or if you’ll combine finances and what your combined budget will look like – it may be best to hold off on buying. Or perhaps you’re completely settled in your career and your relationship and you know you’ll have stability for the foreseeable future, it may be the right time to buy a home and put down some roots. It’s important to take inventory of your life and really think about what makes sense not only for now, but the future you want to have as well.

Finances are arguably the biggest factor to consider when thinking about renting or buying, so let’s break them into two considerations: initial costs of homeownership and long-term costs and savings.

3. Initial costs

The upfront cost of buying a home is one of the biggest barriers for many would-be homebuyers and it’s important to take these into consideration when you’re thinking about buying. Homeownership goes beyond a monthly mortgage payment – initial costs include the down payment, closing costs (around 3% – 5% of the loan amount), moving costs, repairs not covered by the seller, and the cost of furnishing your new space. This isn’t to say that homeownership is unattainable! Often, renting is a great opportunity to save money not only so you can cover these initial costs, but to pay down debt and build up that emergency fund. Building a solid nest egg so you have that 20% down (which eliminates that pesky private mortgage insurance) is often made possible by choosing to rent until you’re ready to buy.

4. Long-term costs and savings

When you’re calculating your budget and determining what monthly mortgage payment you’re comfortable with, it’s important to remember the full scope of expenses that go with owning a home. You need to consider property taxes, homeowner’s insurance, in many cases private mortgage insurance, and potentially homeowner’s association fees. While these numbers can get intimidating when compared to the cost to rent, it’s important to remember that owning a home is a marathon, not a sprint. The benefits of buying a home grow the longer you stay. As the years pass and your home’s equity and value have a chance to build, less of each mortgage payment goes towards interest and starts to pay down the principal balance. If the home you buy isn’t your forever home, but you’re there for a good chunk of time, this means more money in your pocket when you sell.

Compared to rent payments that essentially go nowhere for you, owning a home can be cheaper in the long run. According to a National Association of Realtors report, after six years a homeowner’s mortgage payment is lower than the payment of a renter (assuming rent has a 5% increase each year compared to a fixed monthly payment). Throw in the additional tax savings with the ability to write off mortgage interest as well as state and local property taxes and the homeowner’s payment is less than the rental payment after only three years.