Is renting a waste of money? [PT 1/2]
<div class="user-question">How do I know that it’s time to stop renting and it makes financial sense to buy a place? And how do I prepare for this?</div>
Note: to avoid this getting too long, we've split up this deep dive into two parts. Read the second part here.
Hey there! The truth is, there isn’t a magic age or salary where renting suddenly becomes “wrong” and buying becomes “right.” Deciding to buy is bigger than dollars and cents. It’s about common sense, readiness, and these three things working in harmony:
- Finances: Do you have a steady income, good credit, money saved for a down payment and closing costs, plus money for emergencies?
<div class="frich-tip">Frich tip: Check your credit score for free here!</div>
- Practical Fit: Will owning support your lifestyle better (pets, schools, and living space), or do you need the freedom to move frequently?
- Emotional Commitment: Do you actually want the stability and responsibility - are you ready to commit to everything that comes along with owning, including staying put for a while?
I’m Benjamin - I’ve had the privilege of coaching many first-time buyers through this decision-making process, and I built Fincast to make mortgages more manageable and savings more accessible. Let’s walk through how to know if you’re ready, when you’re ready, and the exact steps you can take to be more prepared and less overwhelmed.
Your No-Fluff cheat sheet to buying your first home
1️⃣ Fine-tune your credit: Aim for a 700+ credit score, if possible
<div class="frich-tip">Frich tip: Check your credit score for free here!</div>
2️⃣ Save up for a home fund: You’ll need a down payment, money for closing costs, plus an emergency fund
<div class="frich-tip">Frich tip: Keep this money in a HYSA so it grows for free! Here are our team's favorite options.</div>
3️⃣ Get pre-approved: Find your preferred lender and discuss how much you can afford
4️⃣ Find your dream home and make an offer: Have some fun shopping for a home
5️⃣ Apply for the loan: Apply for the loan with your preferred lender and get your Loan Estimate within three business days
6️⃣ Shop your Loan Estimate: Don’t settle for the first offer you receive or overpay for your mortgage
<div class="frich-tip">Frich tip: Use Fincast to shop your Loan Estimate and find the best deal. </div>
The “Am I homebuyer-ready?” test
1️⃣ Income consistency (how lenders see you). Most mortgages look for approximately 2 years of verifiable income.
- W-2 employee? Pay stubs and W-2s usually do the trick.
- Self-employed/gig? You can still qualify, but the lender will rely on tax returns and/or bank statements to verify your income.
<div class="frich-tip">Frich tip: If you use a lot of deductions to reduce your taxable income, it can impact your qualifying income with lenders. They’re required to use your net income figures on your tax returns, so if you’re planning to buy a home within the next couple of years, as painful as it is, minimize your deductions and write-offs to show lenders a maximum net income. </div>
2️⃣ Debt habits (the part people miss). Debt itself isn’t disqualifying. What matters is how much you pay every month and whether you pay on time.
- Keep your existing monthly debt payments around ~25% of your gross income or lower before adding a monthly mortgage payment.
- One year of no late payments is a huge green flag. Late payments hurt your credit in a major way, so make sure you do everything you can to pay those bills on time!
<div class="frich-tip">Frich tip: If you're in a situation where you feel like you can't keep up with your debt payments, take a look if debt consolidation might be the right choice for you. Here's our trusted guide.</div>
3️⃣ Credit health (cost of your loan). Higher score = cheaper loan.
- Target: 700+ allows for the best rates/terms. Don’t worry if your score is lower; conventional lenders may approve scores around 620, and FHA lenders may allow scores around 580 with a 3.5% down payment.
<div class="frich-tip">Frich tip: The mortgage credit score a lender pulls is often lower than the one in your consumer credit report because it uses different risk models. Don’t spiral; just focus on the basics: making on-time payments and paying down your card balances.</div>
4️⃣ Emergency fund. The common goal is to save 3-6 months of living expenses, but in today’s job market, I recommend saving 6-9 months. If something happens to your income, that cushion allows you to keep your mortgage and other essential life costs current without panic.
<div class="frich-tip">Frich tip: Keep this money in a HYSA so it grows for free! Here are our team's favorite options.</div>
Understand the true cost of owning (beyond “my rent = my mortgage”)
Most first-timers compare rent to the principal + interest part of a mortgage. That’s only half the story. Your real monthly homeowner cost is PITI (pit-tee):
1️⃣ PITI (pit-tee):
- P = Principal: The part of your payment that reduces the loan balance.
- I = Interest: The cost the lender charges you to borrow.
- T = Taxes: Property taxes set by your county/city, which are often paid monthly into an escrow account so the lender can pay the tax bill for you annually.
- I = Insurance: Homeowners’ insurance (HOI), which is also typically included in your upfront and monthly escrow payment - this is built into your monthly mortgage payment.
<div class="frich-tip">Frich tip: If your principal + interest is $1,500, then you add in your taxes (say $250/mo), add in your insurance (say $180/mo), and if you have an HOA ($150/mo), add that in too, and suddenly, your “$1,500 mortgage” is now $2,080. That’s the number to compare to rent, not the initial principal and interest payment of $1,500.</div>
2️⃣ Maintenance: why people use the “1% rule”
A common, simple planning rule is to set aside 1% of the home’s value per year for upkeep.
- On a $300,000 home, that’s $3,000/year or $250/month.
- This isn’t a fee you pay every month - it’s your own reserve for the things landlords used to cover: HVAC service, water heater, roof repairs, appliances, pest control, lawn, small fixes that add up. Older homes or harsh climates can end up costing more, so some folks set aside up to 3% of the home value, depending on the age/condition and location of the house.
3️⃣ Closing costs: the day-one cash people forget
Plan 2-5% of the purchase price for things like appraisal, title insurance, transfer taxes, lender fees, prepaid taxes/insurance, and inspections. On a $300K home, that’s $6K-$15K on top of the down payment.
4️⃣ Insurance & location: budget it before you shop
Insurance rates have risen in many areas, and Texas can be spicy in some ZIPs due to wind/hail. Before you fall in love with a house, get real quotes. Insurance alone can change your “this fits” to “this is tight.”
<div class="frich-tip">Frich tip: Make an “Owner Budget” worksheet with lines for P, I, T, I, HOA, and Maintenance Reserve (price × 1% ÷ 12). If that all-in monthly plan fits your cash flow and lifestyle, you’re closer to being ready.</div>
When renting is the smarter move (for now)
- You want flexibility. If you might switch cities, change jobs, or co-live with a partner in the next 3-5 years, renting protects your options.
- You’re still building your base. If buying would take your savings to near zero, give yourself time to stack cash and polish credit; it makes your future mortgage cheaper.
- You’re exploring lifestyle fit. Pets that need a yard? Love your downtown walkability? Want to test school zones? Renting lets you “date” neighborhoods before you “marry” one.
- Analogy that helps: Renting = dating. Buying = engagement + marriage. It’s okay to keep dating until the place and timing feel right.
Found this valuable? Here are some more deep dives from the Frich team 🤝
✅ Groceries, Gas, Gifts - Everything’s Up… Except Your Paycheck
✅ Can I trust credit repair services?
✅ Will I ever be able to buy a home??
Keep an eye on your inbox for part two next week!
Benjamin Schieken, Founder & CEO of Fincast
