Homeownership has traditionally been perceived as part of the American Dream, and many would argue that it still is. In fact, 40% of Americans want to buy a house within the next year. However, recent inventory shortages and increasing home prices (which are up by an average of 12% compared to 2019) have many wondering whether now is the right time to buy a home.

Are you deciding between renting and owning? You’re not alone. 

For years, whether it’s better to rent or buy has been a hot topic for debate among home dwellers. A recent survey revealed that 57% of people think that renting is just throwing money away, but for some, renting makes sense financially and personally. Here are seven times you should consider renting instead of buying a home. 

You don’t have enough for the down payment. 

Buyers should put 20% down on a new house to avoid paying private mortgage insurance (PMI), which can be as much as 2.25% of the initial loan amount annually until 20% of the loan is paid off. On a $200,000 home, for example, you would need $40,000 down plus an additional 2% to 4% to cover closing costs. 

Your credit score is low. 

It is more challenging to get approved for a mortgage if your credit score is below 700. There are programs available for scores as low as 500, but they typically have higher interest and fees. Signing another year’s lease to rent and improving your score could result in a better mortgage type and lower interest rates. 

The future is up in the air. 

Buying a home is a solid financial decision if you plan to live there for at least five years. If you’ve been thinking about switching jobs or location, or you’re not sure you want to commit to living with your partner, it may be better to rent for now. Otherwise, you risk losing money on the closing costs, not selling the property or having to rent the house out. 

You don’t have time to maintain a home. 

Those with busy work schedules and lifestyles may want to reconsider buying a house solely to have less responsibility. One of the biggest benefits of renting is not having to mow, shovel snow, clean gutters or fix appliances. These responsibilities reside with the property owner. 

The flexibility to move when you want. 

If the idea of moving with little notice is appealing, then renting is better than buying a home. Typically, renting requires a 12-month commitment, and you have the opportunity not to renew your contract. When you own a house, moving depends on how quickly the house sells and the current state of the market. 

When houses are selling over the asking price. 

More than 20% of homes on the market in 2020 sold above their initial asking price. This trend is likely to continue into 2021 as inventory falls short of matching the demand for homes. Paying above the asking price puts many at risk of paying more for a home than it's worth and gives those who can pay in cash a buying advantage because the bank doesn’t have to approve the loan-to-value amount. 

If you are new to an area. 

If you’ve recently moved to a new town, it might be a good idea to rent for the first year until you know more about the area. As you spend more time there, you will find what you like or dislike most about various neighborhoods and community hubs. Then you can buy a house near your favorite spots.

Contrary to popular belief, buying isn’t always the best option. As exciting as you may be at the prospect of decorating, renovating and putting down roots in a home that you own, you should take your time to make sure buying is right for your situation. In some cases, renting may be the better option — at least for the time being.