A financial planner shares 3 questions to figure out if you're ready to buy a home, no matter how much interest rates fall

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• Would-be homebuyers have been waiting for interest rates to drop — but homes are still expensive.
• Even if a mortgage becomes more affordable, it's just one of the many costs of owning a home.
• Buying a home can be a good idea if it's what you really want and you have a clear plan for the future.

Many would-be homebuyers eagerly awaited the Federal Reserve's meetings in September and November, thinking they'd finally get some relief from high interest rates if chairman Jerome Powell delivered the news of a rate cut.

Rate cuts did come as expected, with a 50 basis point drop in September followed by another 25 basis points in November. And it made almost no difference to the home affordability crisis that has been unfolding since the pandemic years.

Some borrowing costs are actually up since September's rate cut. Treasury yields (which impact mortgage rates) also shot up following Election Day, indicating investors predict the tax and tariff policies of a Trump presidency will mean more inflation and high borrowing costs.

With it seeming impossible to catch a break on costs if you hoped to stop renting and start buying a home, it's well worth considering if buying is even the right goal.

Consider factors beyond the monthly mortgage payment

The thing about homeownership is that it's always been expensive. Once you own, you're responsible for all the maintenance, upkeep, repairs, and renovations required to keep that physical structure secure, sound, and livable.

One of the biggest mistakes I see people make when considering if they should rent or buy is when the only number they consider is the monthly mortgage payment.

That's the easiest figure to compare to a monthly rent payment, of course. But it doesn't quite capture the reality that home ownership is likely to eat up more of your cash flow than renting will. Make sure you account for:

• The principal and interest on your loan
• Property taxes (and how they may change in the future)
• Homeowners insurance costs
• HOA or condo fees
• Required maintenance or upkeep
• Choice repairs or renovations

Once you consider all the costs involved, you may find that buying is not actually the financially optimal choice over renting.

Of course, just because buying isn't always better than renting doesn't automatically make the inverse true, either!

This is why you need to look at a range of factors beyond the top-line monthly mortgage payment.

Here are three questions to help you gain some clarity for your specific situation.

1. How much of your income will go to paying for housing?

I recommend my clients keep their total housing costs at 25% or less of their gross income. This is a benchmark you can use regardless of whether you rent or buy.

The reason my financial planning firm uses this 25% figure is that we've found it's the sweet spot between leveraging enough of your earnings to pay for a home (through ownership or rental) while also leaving plenty of available cash flow to cover other wants and needs.

Once you start spending more than 25% of your income on housing, you may find it difficult to have enough available to cover other expenses, discretionary spending, or savings goals.

Seeing how much of your income you expect to spend as a renter versus a homeowner can help inform your decision on which option is best for you.

2. How long can you commit to living in a specific home?

If your plan is to live in a particular location for less than five years, renting might be optimal. That includes a scenario in which you don't have a plan at all; if you're faced with a lot of uncertainty, it doesn't make sense to get tangled up in a highly illiquid asset that may prove difficult to unload quickly.

Between higher mortgage rates and all the transaction costs of purchasing and selling real estate, you may be gambling on whether you can build sufficient equity in a home you own in five years or less to make up for the costs of ownership.

3. What do you actually want?

Don't assume that the cultural or societal narrative of homeownership as the ultimate dream applies to the unique context of your life.

There is no unwritten law of the universe that says you need to buy a home, and there are many benefits and freedoms that can come from being a long-term renter. That being said, you'd be wise to consider what financial planning moves you may need to make to offset a lack of future equity — which could be as simple as saving more now so you can have a bigger investment portfolio to rely on down the road.

If you're happy renting, rent. If you want to buy, great! The next step will be to make a plan for doing just that.

But incorporating "buy a home" into your financial plan should only be a step you take because you have decided that home ownership is a priority to you. It's too pricey a proposition to chase after just because it feels like something you "should" do.