It wasn't so very long ago that the housing boom lured renters into homeownership. That trend is not changing. Rents are rising every year. In 2006 rents rose 4.1% nationwide.

Interest rates are beginning an upward creep and home appreciation is slowing. This gives landlords the upper hand and they are raising rents like crazy! Meanwhile, the real estate market is changing to a buyer's market. If you are a renter who is tired of high rents and are thinking about buying a home, then now may be a good time to take a serious look at homeownership.

Just because sellers are offering incentives and interest rates are still low don't jump into homeownership until you are really ready for it. Ideally, buying your first home should be a decision that you make regardless of what the market is doing. No one in real estate has a crystal ball, so they can't know for a certainty what will happen in the next few months or the next year. Don't take the advice of an eager real estate agent who only wants to make a sale. Approach the problem as if it were an important business decision. Never buy on emotion or because all your college friends are buying home. Wait until it makes sense for your finances.

Before you decide to buy there are several things you must get squared away ahead of time.

Make a budget and learn to stick to it

Owning your new home comes with a lot of expenses you do not have when renting. Money management skills are a must. You have to know exactly where you money is coming from and where it is going each month so you will know what you can afford. Just to make sure you have budgeted for a new home, find out how much houses are selling for in the area you want to buy and calculate your mortgage. Most real estate sites can provide this information. Once you estimate your mortgage payment, then factor in utility payments, homeowner's insurances, property taxes, homeowner's association fees, as well as higher commuting costs if you are going to be farther away from your job. If you cannot afford the increased expenses, it is not a good time to buy regardless of what the market is doing.

You have to have a reliable source of income

Buying a home is a long-term financial commitment, so you'll need a consistent cash flow to cover your monthly expenses. If you are now in school, plan to return to school, have a small child, plan to have children, you will need to look at your future earning potential. If a couple can afford a house when both are working and a baby comes along and one has to quit their job, they are in trouble.

Have an emergency cash reserve

This is something so many people neglect. It is wise to have 3-6 months of cash in reserve in case of a lay-off, a serious illness or a natural disaster. With a reserve of cash, the pressure will be off until you can return to work.

Your credit report must be in good shape

While you don't have to have perfect credit to buy a home, the higher your credit rating, the lower your interest rate will be and the lower your mortgage payments. If it needs cleaning up, then get to work on that. A couple of years before you buy, don't make the mistake of missing payments or have any other black marks on your report. You want to look good for lenders.

Have your debts under control

If you have any outstanding debts, it is a really good idea to get them paid off. Lenders look at your debt-to-income ratio and your total payments, including your new mortgage payment, should not equal more than 38% of your total gross income.

Making a long term commitment

Are you ready to stay in one place for 3 to 5 years? Typically, that is how long you will have to keep the home to recoup your buying and selling costs. Selling before then means you will likely loose money. Also, if you have lived in the house for less than two years and you make a profit when you sell it, you will have to pay capital gains tax.

The folks at Nancy Chandler Associates, REALTORS, Licensed in Norfolk, Virginia, can help you with every step of your home buying process, including helping you determine if it really is the right time for you to buy.