1. How long do you plan on living in the home?

If you purchase a home and then get a job transfer or decide to move after only a short time, you may end up losing money because of the transaction costs. The value of your home may not have appreciated enough to cover the costs to buy a new home and sell the current one. The transaction cost - commissions and fees - plus the transition cost - moving, changing utilities, storage - could wipe out several years' worth of hard‑won equity.

Do this simple calculation to estimate the tradeoff.

Transaction cost + Transition costs = X

How many years will it take for your equity to be greater than X? That is how long you must own to actually gain equity just on the cost of selling. Add in property taxes, improvements, and maintenance, then offset that with the value of the mortgage tax deduction, and you will soon have a true picture of how many years you must own the house to pull ahead of renting.

2. How long will the home meet your needs?

What features do you need to meet your needs now and five years from now? Will your family expand or contract in the next few years as babies arrive or children leave for college? Would your home need to accommodate more people as kids move back after college or aging parents need to move in?

3. How is your financial health?

Would you rate your financial picture as healthy? If you are eager to own, it's worthwhile to talk with a mortgage lender to scope out your financial situation, see what you must repair and save, and plot your strategy for qualifying for a market‑rate mortgage.

A time‑tested formula is the "28/36" rule, which means that your monthly housing costs can't exceed 28 percent of your income and your total debt load can't exceed 36 percent of your total monthly income. Depending on your assets, credit history, job potential and other factors, lenders can push the ratios up to 40‑60% or higher. While we're not advocating you purchase a home utilizing the higher ratios, its important for you to know your options.

Where will the money for the transaction and down payment come from? At the very least, you will need a 3% down payment to qualify for a government‑guaranteed mortgage under a special program for certain regions, or special circumstances, such as those for veterans.