Most people would be better off as homeowners than as renters. Some financial advisors suggest renting and investing the difference instead of buying a home, but that advice doesn’t always reflect real life. The truth is, home ownership remains one of the most effective ways for average people to build wealth over time.
If you’re renting now but want to own a home, you’re not alone. Many renters in 2025 are looking for ways to break free from rising rents and start building home equity of their own. But making the leap from tenant to homeowner requires planning, preparation, and good timing.
In this guide, we’ll show you how to transition from renting an apartment to owning a home — including how to budget for mortgage payments, understand the monthly costs, and work around lease terms.
To begin, let’s look at the key differences between renting vs buying a house:
Renting isn’t wrong, but it’s not usually a long-term wealth-building strategy. As soon as your financial situation allows, switching to owning a home can give you more control and a better future.
Renting may offer more flexibility, but there are trade-offs. Here are the biggest cons of renting:
These downsides become more obvious the longer you rent, especially if rents continue to rise faster than your income.
One of the biggest transitions from renting to owning is understanding your new mortgage payments. A monthly mortgage payment includes more than just repaying the loan:
If you choose a fixed rate mortgage, these costs stay stable, making it easier to plan consistent payments over time.
When comparing monthly payments, you need to look beyond just rent vs. mortgage. A renter’s budget includes:
A homeowner’s monthly housing costs may include:
In some areas, monthly mortgage payments may actually be lower than monthly rent payments — especially in 2025, where rent costs have outpaced income growth in many cities. It’s also important to consider what each payment buys: rent gives you a place to live; a mortgage buys you ownership and equity.
One area first-time buyers overlook is the full list of other costs that come with a home purchase. These include:
While some of these are one-time fees, others are recurring costs. That’s why it’s so important to budget before you buy.
As a renter, if the plumbing breaks or the fridge dies, your landlord handles it. As a homeowner, those costs are yours.
Experts recommend setting aside 1%–4% of your home’s value each year for:
You don’t need to spend that every year, but the opportunity cost of not saving is high — an unexpected $4,000 repair could put you in debt without an emergency fund.
Every time you make a mortgage payment, part of it goes toward paying off your loan. This increases your ownership interest in the home — also known as home equity.
Unlike rent, which disappears forever, equity is something you keep. You can borrow against it, sell the home for profit, or pass the property on to family. Equity can also grow faster if home prices in your area rise. That’s why building equity is one of the biggest financial advantages of owning a home.
Everyone who is planning to get a mortgage should take some time to review his or her credit and make sure it’s ready. It’s well known that 1 in 4 credit reports contain errors that can affect your creditworthiness, so you should pull and review your credit even if you’ve never missed a debt payment.
You can get a free credit report from each of the three credit bureaus from www.annualcreditreport.com, and you can purchase your credit scores from www.myFICO.com.
Make sure your credit reports are accurate, up-to-date, and reflect positively on you. A certified credit report reviewer can help, or you can get our free Consumer Guide To Good Credit (from our downloads page) to help you with those steps.
If there are negatives you can’t remove, you can add a 100-word statement explaining why the negative item is on your credit report. This statement won’t help your credit score, but a human reviewing your credit report will take it into account, and it can help smooth the way for you with certain lenders. Learn how to add this statement from our Consumer Guide at the download link above.
Learn more: Adding a 100-Word Statement to Your Credit Report
If you have past due debts, pay them off or get caught up. It’s important to do this in advance of applying for a mortgage (the further in advance, the better) to give yourself time for your credit to get better after getting caught up. But if you have past due debts that are older than the statute of limitations, be very careful with making a payment as that can “reset the clock,” talk to a certified credit coach about your options.
Saving for a home while still renting takes discipline — but it’s possible. Here are smart ways to build your savings:
Some buyers also use a payment assistance program to help with upfront costs or combine savings with gift funds from family.
If you’re not ready to buy yet, you can still rent strategically with a plan to become a homeowner. Here’s how:
This mindset helps you prepare for recurring costs while giving you time to work on your financial situation.
Some renters consider rent-to-own options. These agreements allow you to rent a home with the option to buy later, often for a set price. A portion of your rent payments goes toward the purchase price.
Rent-to-own can be helpful if:
But these deals can be risky. You’re responsible for maintenance costs and may lose your option fee if you back out. Always have a real estate attorney review a rent-to-own contract before signing.
Before you move forward with a house purchase, take time to review your lease. Talk to your landlord and ask:
Some leases allow you to leave early without penalty if you’re buying a home and provide proof of purchase. If your landlord needs time to find a new tenant, giving early notice can help you avoid extra monthly rent or early termination fees.
Always get agreements in writing. And remember — unpaid rent or broken leases can hurt your credit just as you’re trying to qualify for a home loan.
Before you close on your new home, you’ll do a final walk through — a chance to check that everything is in the condition promised and that agreed repairs are complete.
Then, on closing day, you’ll:
At that moment, the property becomes your primary residence — and you’re officially a homeowner.
Your journey doesn’t end at closing. Now you’ll manage:
Keep saving, track your expenses, and monitor your home value. You can also explore refinancing later or making extra payments to reduce your interest.
As a homeowner, you will feel the impact of renting vs buying; you will pay property taxes that you didn't realize you were paying when renting a home. Your utility bills might be higher, there may be homeowners association dues, higher home insurance, home repairs, and other potential costs.
Don't let these new costs scare you. The total cost of homeownership might be a little higher than renting, but in some markets it's actually lower. Remember when you own your own home, you can save on taxes with the mortgage interest deduction or other itemized deductions.
Transitioning from renting to owning isn’t just financial — it’s emotional too. You’re responsible for everything, but you also gain:
It’s normal to feel anxious or uncertain. Lean on your support system and celebrate the small milestones: saving a lump sum, getting preapproved, or finishing a budget. You’ve taken a big step toward long-term stability.
Whether you’re just starting to save or ready to buy now, the transition from renter to homeowner is possible. With careful planning and realistic expectations, you can:
Owning your home can change your financial future.
Need help getting started? Talk to a HUD-certified housing counselor — it’s free and designed to guide you every step of the way.