Unfortunately, there is no simple answer to this question. Generally, if your rent payment is equal to or greater than a mortgage payment on a similar-sized home, you may be in a good position to buy. Of course, you would need 20% of the total purchase price saved for a down payment (or less with an FHA or VA loan).
Perhaps the best way to determine if you are ready to buy a home is to sit down with a trusted financial advisor, followed by a talk with a loan officer. The advisor will help you determine if buying a home is a good financial decision, and the loan officer will tell you how much home you can afford. Remember, just because you are pre-approved for a home up to $500,000 does not mean you should buy a home for $500,000; doing so may make you a slave to your monthly mortgage payment and stretch your finances thin.
My best advice is to first carefully consider if you actually want to buy a home. Answer important questions, such as:
- If I (or we) buy a home now, do we plan to be there in five years?
- Am I truly interested in being a homeowner?
- What are my other options?
- Do I have a trusted friend or family member who recently purchased a home that I can turn to for advice?
Go from there, and take it slow! Buying a home is a big decision, whether it is a 1-bedroom condo or 26-room villa.