Nicole Spector
4 min read
Homeownership is one of the core pillars of the traditional American Dream, but it’s not nearly as achievable as it was in, say, 1960, when wages better kept up with the cost of living and the median home price was less than $12,000. It’s now common to rent for a long time before buying a home — and, despite the popular narrative that renting is a waste of money, it can often be the most financially responsible choice.
Find Out: Renting vs. Owning a Home: Which Will Be Cheaper in 2025?
Read Next: 25 Places To Buy a Home If You Want It To Gain Value
Wondering when renting is a smarter move than buying? Consider the following indicators.
To qualify for a conventional loan, you’ll need to put down at least 3% on a home’s total purchase price. That may not sound like much but note that to qualify to put down such a low amount, you also need a credit score of at least 620 (we’ll discuss credit scores more later). The more you can put down, the better. If you can put down 20%, you’ll be in a good spot to negotiate with lenders for a lower interest rate, and ultimately pay less for your house.
If you don’t have enough for a down payment, or you do but it would require dipping into your emergency fund savings or investments, you must recognize this as a major sign that you’re better off renting than buying.
Learn More: 6 Key Signs a Housing Market Will Soon Have Massive Price Drops
A missed credit card payment, a recent application for a new credit card, a credit card account closure or credit card spending limit decrease are all factors that can make your credit score drop. Be sure to check your credit score before you even start thinking about buying a home.
A credit score of 620 is generally (though not always) the minimum credit score needed to take out a conventional mortgage loan. But naturally, lenders like to see high credit scores. Some lenders require you to have a credit score of 720 to qualify for a loan.
You know you’ve got that gnarly down payment to tackle upfront, and you know you’ve got to maintain monthly mortgage payments that come with interest (as of May 29, 2025, the average rate on a conventional 30-year fixed loan was 7.048%), but do you know that you also have to pay property taxes (these average $2,969 a year, but are much higher in ultra-desirable cities) and home maintenance fees and, depending on the type of home you’re buying, possibly HOA fees? Oh, and you’ll also need to pay for homeowner’s insurance, which averages $2,110 a year.
