When renting makes sense

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Falling home prices and tons of home inventory makes this an ideal time to purchase a home. However, tighter lending practices and the current credit crunch may quickly turn this buyers market into a renters market.

While homeownership is often touted as the American Dream, it is not necessarily the best choice for all Americans. Owning a home can have its privileges, but there are some situations where it makes more sense to rent. Before you make a decision to purchase your own home, consider the following examples of situations where it may make sense to rent.

You have less-than-perfect credit. Unfortunately, not everyone qualifies for the best interest rates. Before you get locked in to a 30-year commitment, you may want to improve your standing by paying down debt and establishing a good credit history. Renting may give you the time to need to accomplish these goals.

You do not plan to be in your residence for more than a few years. The initial cost of buying a home is steep and may only be a good investment if you have the time to pay down some of your mortgage debt. Renting, on the other hand, does not normally require you to pay realtor fees or closing costs making frequent moves less costly.

You are not prepared for all the responsibilities of owning. Caring for a home takes a lot of time, energy, and money. When analyzing your situation, don't forget to consider insurance requirements, home repair and maintenance needs, and association obligations. In contrast, maintenance costs are often included in the price of rent.

You cannot tolerate risky investments. As we have learned, we cannot assume that home values will rise. As a renter, the risk of ownership falls with the landlord.

Your money management skills need improvement. A home loan is probably the largest debt that most people incur and the decision to commit to this big-ticket item should be taken seriously. Since most people's housing costs consume 20 to 33 percent of their budgets, you need to be certain you can continually meet this responsibility.

Finally, you can rest assured that your homework and preparation will help to enjoy your dream home -- regardless of whether you choose to rent or own.