10 Overrated Life Decisions

Buying a House
Marquita Ealy of the Richmond, California chapter of the Alliance of Californians for Community Empowerment (ACCE) tours a foreclosed home. Foreclosure is one of the risks you take if you buy a home before you are ready. Justin Sullivan/Getty Images

Buying a home is the crowning achievement of the American dream. Renting is seen as transient and unsettled, while home ownership is a sign of financial and emotional stability. A home is an opportunity to put down roots — a foundation on which to build the future of your family.

Or, it could be a gaping money pit.

If you can't pay your rent, you can break your lease with minimal penalties. If you can't pay your mortgage, you are looking at foreclosure, which will drag down your credit score.

If you're renting and your water heater starts leaking, that's the landlord's problem. If you own your home, it's your problem. If you aren't handy, you'll have to pay someone to come fix it or pay for a replacement.

If you're still undecided between renting or buying, use a simple formula called the "price-to-rent ratio," or P/R ratio. Here's how it works. Find two similar houses or apartments in your target neighborhood, one that's for sale and one that's for rent (Web sites like Trulia make this easy). Take the sales price and divide it by the annual cost of renting (monthly rent times 12). If the number is greater than 20, then it's a better financial deal to rent [source: Roth].