Buying a home is one of the biggest financial decisions you'll ever make—next to opening your own business. It’s a decision you mustn't take lightly, and you should be mentally and emotionally prepared to make that decision. If you are considering taking the plunge into home ownership, ask—and honestly answer—the following questions:

1. Am I ready to put down roots?

Renting makes it relatively easy for you to relocate, but if you buy a home, you need to stay put for a while. You may be able to rent it out or resell it, but keep in mind that the costs associated with buying a home (for example, escrow fees, taxes and closing costs) take some time to amortize. Also, you could get hit with capital gains tax if you sell and haven't owned and lived in your home as your principal residence for at least two of the five years before you sell the property.

2. How much house can I afford?

Most lenders recommend that you spend no more than 28% of your monthly income on a mortgage. If you live in a competitive real estate market, where homes are exceptionally high-priced and inventory is low—for example, San Francisco or New York City—finding a home that you can afford can be tough.

Look at your complete financial picture—including all debts, total savings and assets—to decide how much of your income you can devote to a mortgage payment. Use The Wall Street Journal's "How Much House and Home Mortgage Can I Afford? – Calculator" as a place to start. Remember that, with house ownership, you will have unexpected costs from utilities, repairs and equipment that you will need to fund to maintain the property (e.g. lawn mower, garden tools, etc.). In addition, you will need to set aside money for emergencies (e.g. unexpected heat pump or water-heater replacements). Don't stretch yourself too thin; you don't want to be house poor. Some opportunistic lenders may offer you much more than you can afford, so create a budget and stick to it.

3. Are my finances good (errr…great)?

All kinds of loans exist, and many exist that don't require any down payment. Some will even roll closing costs into your monthly payment. However, to get the best interest rates, lenders want to see high credit scores, at least a 20% down payment (that doesn't include closing costs), evidence of job longevity and security, and some even want to see that you have rented the same home for at least two years. Find a reputable lender and then weigh all of your options, heavily considering your monthly payments, total interest you'll end up paying and the length of your mortgage terms. You may decide for now that a lower monthly payment is more important to you, so you are willing to go with a longer term—or you may hate the idea of paying so much interest and opt for a shorter term.

4. What really matters to me?

Do you want a good school system? More land? Quick access to public transportation? Do you want a single-family home with a yard in a tree-lined neighborhood or a loft in the city? It can be easy to get blinded by the bells and whistles of a home. But high-end appliances and granite countertops won't make up for the problems you'll face if the property is not right for you and your family in the long run. Heavily weigh whether a home will offer you enough space now and several years from now, whether you can handle the commute from your house to work and whether you can see yourself being happy there even after you experience major life changes (e.g. marriage, birth of children, children leaving the nest, etc.).

5. Can the home hold its value?

Real estate markets across the country are still shaky. While some areas have rebounded to near pre-bubble prices, others are still struggling. You can never predict the ups and downs of the housing market, but you can investigate issues that might decrease or increase the value of the home. Elements that increase value are a strong school district, parks, great access to public transportation or other commodities, and safety. Elements that decrease value are a high crime rate, major construction, proximity to a freeway or loud noises, or a surplus of inventory. Sometimes your best bet is to buy the worst house on the best block and slowly renovate it, rather than buy the best house in the worst area.

6. Are you ready to be your own landlord?

Sometimes things break or just stop working, and even the newest homes need maintenance. You won't be able to call your landlord to fix problems. The responsibility will rely totally on you. If you aren't handy—or if you aren't willing to become handy—you will need to be able to pay other people to come and provide regular maintenance. You'll need a hefty paycheck and/or savings to be able to do so.