Figuring out the answers to the four questions below will guide you to the right answer to the big question above. By Andrea Browne Taylor, Online Editor and Susannah Snider, Staff Writer May 29, 2012 Are you tempted to buy a house? Years of price declines have made buying a home more affordable than renting in all but two of the 100 largest metro areas, according to real estate Web site Trulia. (The two renter-centric cities? Honolulu and San Francisco.) Plus, mortgage rates are still appealingly low. SEE ALSO: Our Slide Show of 10 Great Cities for Young Adults But does that mean you should buy? Before you make the leap into a lifetime of mortgage payments and home-maintenance routines, here are a few questions to help you decide whether you should rent or buy. Our answers led one of us down the path toward homeownership, with the other steadfastly strolling the route of renting. Which direction will you take? 1. Where do you live? The cost of buying versus renting varies greatly from city to city. A smart way to weigh the two options is to divide the average asking price for a home in your city by the typical annual rent for a comparable home. This will yield a price-to-rent ratio. For example, if the average sales price is $200,000 and average rent is $1,500 per month -- that’s $18,000 per year, for the math-challenged -- then the ratio would be 11.1. In general, a price-to-rent ratio below 15 benefits buyers; above 20 rewards renters. Ratios between 15 and 20 can go either way, depending on a number of factors, from taxes to appreciation potential. To find home values, try our home-price tool or go to www.zillow.com. For average rents, visit home-price tool or go to rentometer.com. Advertisement Andrea says: Numbers don’t lie. Here in the Washington, D.C., metro area, the price-to-rent ratio is a buyer-friendly 11.2, according to Trulia’s Rent vs. Buy index. And I know I’m basically paying in rent what several of my friends who own condos in this area are spending monthly on their mortgages. But they're able to build equity and qualify for tax write-offs exclusive to homeowners, while I simply kiss my rent dollars goodbye forever. Susannah says: Sure, my astronomical D.C. rent disappears into my landlord’s pocket each month. But that price buys me the freedom to move to another city with a few weeks’ notice, to live with any combination of roommates and to outsource maintenance work to my handy super. I’m young and restless, and not recouping my rent money isn’t a big concern. Advertisement 2. How long will you stay put? Remember that home buying is a long-term commitment. If you're not planning to stay in the home for at least five to seven years, think twice. The average origination and title fees on a $200,000 mortgage totaled $4,070 last year, according to BankrateBankrate. “Those costs aren’t worth it unless you’re going to stay in that home long enough to spread them out,” says Jed Kolko, of Trulia. So ask yourself, in the next five years, might you need to relocate for, say, grad school, a new job, your future spouse or hypothetical children? If so, renting will allow you the flexibility to pick up and move on short notice. Andrea says: I don’t see myself leaving D.C. within the next five or so years. My family and close friends are all here, and career-wise, a number of reputable companies are based in this area, if and when the time comes for me to consider pursuing other job opportunities. Susannah says: D.C. rocks my socks, but my job is the only thing really keeping me here. My family is back in the Midwest. Many of my closest friends live in New York or Chicago. I love Kiplinger, but journalism’s a fickle industry with lots of turnover. When it comes time to consider a career move, I don’t want to be tethered to local options. Advertisement 3. What is your monthly budget? As a homeowner, you'll have a lot of big new expenses to cover with your same old budget: mortgage payments, utility bills and costs for standard upkeep. Plus, you should consider beefing up your emergency fund for less-routine maintenance issues, such as a fallen tree branch or a burst pipe. All of those new costs can be pretty intimidating. But if you've got room in your monthly budget, home buying makes sense for the long haul. You'll be building equity, and your housing costs won't be exposed to inflation like they are with renting, says Eric Tyson, co-author of Home Buying for Dummies. Andrea says: I’m not so worried about fitting homeownership costs into my current budget. However, other factors, such as the shaky economy and job market (especially for journalists), do worry me. I’ve watched many friends and colleagues who were homeowners get laid off over the past few years. It’s a scary thing to be jobless with a mortgage and without enough savings to last you until a new gig pans out. So I'm not sure my budget can withstand owning a home in that kind of problem situation. Susannah says: I have so many other financial obligations as a young professional in D.C. I’m paying off student loans, building my retirement account and growing an emergency fund. I don't have room in my budget right now for homeownership costs. Advertisement 4. How much do you have saved? The sexiest housing market in America offers nothing if you don’t have savings. Putting down 20% of the sales price is a common requirement. That number may seem steep, but it will help you qualify for the best loan terms, and it eliminates the additional cost of private mortgage insurance, or PMI, says Tyson. (PMI is typically required when a buyer makes a down payment of less than 20%, according to HSH.com. It protects the mortgage lender in the event of a default on the loan.) If you have a ways to go before reaching that 20% mark, weigh saving for a down payment against your other financial obligations. “Saving for retirement should be the priority,” says Andy Tilp, a financial planner with Trillium Valley Financial Planning. Once you retire, you can’t “eat your house,” he says, meaning that it’s difficult to access the equity locked up within the walls of your home. Bob Morrison, a financial planner with Downing Street Wealth Management, agrees that saving for a down payment should be a lower priority. “Pay off student loans and credit card debt first," he says. "Those 7% to 8% interest rates cost so much.” Andrea says: A few months ago, I started my quest for homeownership with the goal of being out of my apartment by the time the lease expires this summer. However, I’m on the fence (again), largely due to my wanting to spend the rest of this year saving up enough money to make a 20% down payment. Right now, I have a little over half that amount. The idea of paying PMI, when I don’t have to, just doesn’t seem like smart spending to me. Susannah says: See above. Saving for a 20% down payment isn’t on my to-do list right now. Follow Andrea, Susannah and the whole Starting Out Kiplinger team on Twitter.