Should You Rent or Buy a Home? Here's What Suze Orman Thinks

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  • Renting or buying a home is a big financial decision.
  • You don't want to make a mistake and purchase a home before you're prepared.
  • Suze Orman has outlined some things to consider in deciding whether to buy or rent.

The finance guru's advice could save you from a major mistake.

Everyone needs someplace to live, but that doesn't mean chasing the dream of homeownership is the right choice for everyone. While you'll often hear that buying a home helps you build wealth, that's the case only if you're in a good financial position to buy and qualify for an affordable mortgage you can easily repay.

So, how should you decide whether to rent a property or buy your own place? It can be complicated, but expert advice can help you make the right decision. Suze Orman provides guidance on this issue, detailing some situations when renting makes sense as well as outlining certain conditions to meet before purchasing a property. 

Here's when Suze Orman says you should rent

Orman identified a few situations where renting is better than buying. As she wrote in a post for, she believes it's a good idea to rent if:

  • You have credit card debt.
  • You don't have at least 10% down.
  • You think you'll move within the upcoming five to seven years.
  • Buying a comparable property would cost much more than renting.
  • You aren't ready to take on the risks of homeownership.
  • You aren't ready to take on the responsibilities of homeownership.

Orman acknowledges that it's possible to buy a house with a smaller down payment, especially if you use an FHA loan. But, she firmly believes that if you "haven't saved for a sizable down payment, you are not yet ready to own."

She also warns that you shouldn't get caught up in the pressure to purchase a home just because it seems like that's the right next step. "There's absolutely no rule that says you must own. Whatever feels right to you is the right move -- as long as you can afford it."

Here's when Orman says you should buy a home

So, it's clear Orman believes renting is a good financial move under certain circumstances, but what about buying? Orman has outlined some financial tasks she believes you should complete in order to be ready for homeownership. These include:

  • Saving up an eight-month emergency fund
  • Making sure you have at least 10% down -- and ideally 20%
  • Testing out what your post-purchase budget will be if your housing costs will rise after you purchase a home

While many financial experts suggest a smaller emergency fund, Orman is more conservative in her approach. “You need to know that you’re going to be secure,” she warned at the eMerge Americas Conference. "We live in the craziest world I’ve ever seen in my life right now. And the only way you can take craziness out of that is for you to make yourself secure.”

She also urges a larger down payment to avoid private mortgage insurance, which is a type of insurance home buyers must purchase if they make less than a 20% down payment. Although buyers are required by lenders to pay for it, this insurance doesn't actually stop them from incurring losses. Instead, it ensures lenders get back the full amount of money owed to them if they must foreclose.

Orman also says to ‘play house’

And finally, she suggests you "play house," which means if your post-purchase costs will be $1,500 (including your mortgage and all other housing-related expenses) but you are currently paying $1,200, you should put the other $300 into savings monthly to make sure your new budget will actually work for you. 

By following Orman's advice on making sure you're financially prepared -- and in a good position to buy -- you should hopefully be able to make a fully informed choice about whether renting or buying is right for you. 

Our Research Expert

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