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For years it seemedthatbuyingwas the only smart way to go when it came to housing.

Paying rent, many said, was just throwing money away when you could be building equity in a property and gaining a significant tax break from the deduction for mortgage interest and some property taxes.

Now, with home prices dropping and foreclosures rising, buying doesn't look like such a slam dunk. Is this the time to get a great deal on a house? Or is it wiser to rent?

No one can predict the future of home prices. But we can provide three points of consideration to help you decide whether to rent or buy your next home.

Point No. 1: Spend no more than 28% on housing

Planners recommend you spend no more than 28% of your gross monthly income on housing.

If you buy, that 28% should cover:

• Property taxes.
• Homeowner's insurance.
• PMI (private mortgage insurance), if you don't have 20% to put down on your new home. Lenders estimate PMI to be around 0.5% of the loan amount.
• Home maintenance costs.

If you rent, the 28% should cover:

• Monthly rent.
• Renter's insurance.

Maintenance costs and property taxes are paid by the landlord when you rent.

Point No. 2: If you're buying, plan to stay put for at least 5 years

If you're looking for a place to live, but are planning to move again within the next 3 to 5 years, it may make more sense to rent.

When you rent, your initial out-of-pocket expenses are usually the first month's and the last month's rent. When you buy, it's a different story.

A transfer tax is something you may need to pay whether you're buying or selling. For example, if the tax in your state is 1% of the price of the home--and you're purchasing a $300,000 home--the transfer tax alone would be $3,000.

In addition to the transfer tax, some of the other closing costs may include:

• Loan origination fee, which often is 1% of the loan amount.
• Appraisal fee.
• Mortgage application fees.
• Property taxes.
• Interest on the loan for the number of days until the first payment is due.
• Recording fees.
• Points (each point is equal to 1% of the mortgage amount and is paid to reduce the interest rate on the loan).

Putting down that kind of cash may be best if you're committed to staying in your home for more than five years.

If you need to move and you're renting, you'll just need to give your notice at the end of the lease, pack your bags and go. If you own, however, you'll need to find another buyer, which could take a considerable amount of time and some money if you need to make repairs before you sell.

Point No. 3: If you're buying, it helps to be handy

With home ownership comes a certain level of time commitment. You'll most likely be spending weekends mowing the lawn, clearing gutters, raking leaves, or maybe working on a home project.

For many people, their first home may be a fixer-upper. Buying a house for less because it needs cosmetic upgrades can help when entering the housing market for the first time.

Just be careful that you know what a home's potential problems might be before you buy. Hire a reliable home inspector, not just someone recommended by the seller. Be prepared to walk away from a home you like if you find out it needs extensive or expensive repairs.

If you don't have much time because of work commitments, or a cosmopolitan lifestyle, renting may be the better choice.

And renting is clearly the better bet if you dread lawn work, or if the thought of painting a room gives you hives.

This article is intended for educational purposes only and should not be construed as advice.

According to the latest Zillow Real Estate Market Report, home values in Chester, NJ decreased 4.40%; hackettstown, NJ 6.6%; Mendham, NJ 7.4%; Long Valley, NJ 4.3%, in the second quarter of 2008. compared to the second quarter of 2007. Nationally, home values decreased 9.9% during this same period.

When buying an apartment, or any home, it is important to consider not only features that fit your lifestyle, but also those that will result in the greatest resale potential. According to the real estate Web site UrbanDigs.com, the top four apartment features that result in the greatest resale potential are location, views, square footage and the amount of sunlight the apartment gets.

Other features that can boost resale values include:

• Scalability: A unit that can grow with a new owner (e.g., a one-bedroom that can easily be converted into a two-bedroom).
• Intelligent use of space: Buyers want the most space they can get, especially in the actual living areas. Large foyers and long hallways tend to be wasted square footage.
• Separate dining room: Apartments that have a dedicated eating area free up the living room for other purposes.
• Possibility of change: Look for spaces that can be reconfigured for multiple uses (e.g., a closet that can be converted into a bathroom).
• Separate bedroom spaces: Bedrooms located on the opposite sides of the apartment allow children to be situated on one end and adults on the other end. This type of layout is also good for roommates.
  By considering these tips when purchasing a home, you can make the most of your investment while enjoying an adaptable space that can grow with your needs.

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Miranda Tsotsoria

www.mirandatsotsoria.com