Figure out how much you can afford

The cost of a home is much more than a monthly mortgage bill. There are also property taxes, maintenance, utilities, insurance and possibly homeowner association dues. If you can add all of those up and set that amount aside for a few months, and still pay the mortgage, then you can afford a home.

Calculate how long you will stay in the home

There are many costs to buying a home and you'll want to stay in a house as long as possible for the savings from renting to make up the difference. The costs -- such as a real estate agent's fee, closing costs, inspection fees and loan fees -- can add up to 10% of the sale price, or approximately 18 months of rent. Spreading that over 10 years or so is much better than leaving a house after a few years.

Compare buying vs. renting

This sounds like an easy step you could do on a piece of paper with a calculator. You probably could if you're good at math, but take the easy way out and let a loan calculator do it for you. Just plug in the numbers -- home purchase price, loan amount, length of loan, interest rate, property tax and other costs -- and you'll quickly find out if it's cheaper to rent or buy.

Take advantage of the tax credit.

The $8,000 credit is some incentive to buy a home, although you must meet certain qualifications. While some members of Congress were skeptical that the program, which was to expire in November but has been extended, wasn't an incentive for first-time buyers, the real estate industry differs. It estimates that 350,000 of the 1.4 million first-time buyers who qualified for the credit through August would not have bought their homes otherwise, according to a rules about the credit, including that it can only be used on homes that cost $800,000 or less, not be used on vacation homes, and that the buyers' income can't be higher than $125,000 for an individual for $225,000 for buyers filing jointly.