Fidelity warns homebuyers to check 5 things before signing on the dotted line

Fidelity Investments published a five-question checklist on May 20, 2026, designed to help prospective buyers evaluate whether they are truly prepared to purchase a home.

The framework covers financial readiness, the minimum time you should plan to stay, local market dynamics, appreciation risk, and emotional preparedness.

What makes the checklist distinctive is its focus on the buyer rather than the property, forcing you to evaluate your own situation before committing.

Here is what Fidelity says you need to evaluate, along with the specific thresholds and benchmarks the firm uses to frame each decision.

Fidelity shares 5 key questions to ask before a homebuying decision

Fidelity says your income, savings, and credit must pass five tests.

Are you financially ready to make the purchase?

Fidelity’s first question asks whether you are genuinely in a financial position to take on a home purchase at this stage of life. The firm breaks readiness into four areas: 

Stable incomeSufficient down paymentStrong credit scoreManageable existing debt

Buyers who put down less than 20% of the purchase price will owe private mortgage insurance, a monthly charge that protects the lender.

A credit score below the thresholds lenders require can prevent loan approval or lock the buyer into a less favorable interest rate.

Unfolding in the housing market is a tale of two cities…We’re seeing buyers with significant housing equity making larger down payments and all-cash offers, while first-time buyers continue to struggle to enter the market.

Fidelity also flagged the 36% guideline, which states that total monthly debt obligations should not exceed 36% of pretax household income.

Buyers carrying student loans, car payments, or credit card balances may discover that adding a mortgage pushes their total debt beyond safe levels.

Nearly one in four recent buyers said their financial situation deteriorated after purchasing a home, according to a 2025 Clever Real Estate survey of 986 Americans.

Are you expecting to live there for several years?

The second question focuses on how long you plan to stay, because the upfront costs of buying a home need time to be absorbed.

Fidelity stated that purchasing likely does not make financial sense for anyone who expects to relocate within three years of closing.

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Broker fees, mortgage origination charges, and title insurance all accrue at closing and can total tens of thousands of dollars.

The longer a buyer remains in the home, the more time there is for those one-time expenses to be offset by rising property values.

Selling before the two-year mark carries an added tax consequence because buyers at that point generally cannot qualify for the capital gains exclusion.

Under Internal Revenue Code Section 121, that provision shelters up to $250,000 in home value gains for individuals and $500,000 for married couples filing jointly.

NAR Chief Economist Lawrence Yun projected that mortgage rates will average around 6% in 2026 and home prices will rise about 4%.

Home prices nationwide are in no danger of declining, Yun added during NAR’s 2025 NXT conference, reinforcing Fidelity’s emphasis on patience.

Is it more cost-effective to rent or buy in your market?

The third question challenges a widespread belief among prospective buyers that purchasing a home always builds more wealth than renting one.

The firm warned that in areas where rents stay low relative to purchase prices, renters who invest the monthly savings may fare better financially.

The firm highlighted the price-to-rent ratio as a practical benchmark: divide a home’s purchase price by the annual rent for a comparable property. 

A result above 20 generally tilts the math toward renting, while a figure below 20 tends to favor buying, Fidelity indicated.

Fidelity urged buyers to factor in the full cost of ownership beyond the mortgage, including property taxes, homeowners’ insurance, and regular maintenance. 

Fidelity also cautioned that the mortgage interest deduction only benefits buyers whose itemized deductions exceed the standard deduction for their filing status. 

For the 2026 tax year, that threshold reaches $16,100 for individual filers and $32,200 for married couples filing jointly, according to the IRS.

Would homeownership still be worth it without rising prices?

The fourth question forces buyers to confront the possibility that their home may not appreciate over the years they own it.

Fidelity noted that while national prices have trended upward over long periods, individual properties can stagnate based on local economic conditions.

A 2025 Realtor.com analysis built on Federal Reserve Survey of Consumer Finances data estimated that the typical U.S. homeowner has a net worth of roughly $430,000, compared with just $10,000 for renters, a 43-to-1 wealth gap.

The most recent direct Fed SCF figures, from 2022, showed a median homeowner net worth of $396,200, compared with $10,400 for renters. Home prices rose in 71% of the 235 metropolitan markets NAR tracks during the first quarter of 2026, NAR data showed.

Prices fell or stagnated in nearly three out of 10 metros, which exposes buyers who count on guaranteed appreciation to meaningful financial risk.

Buyers who answer “no” to this question may need to reconsider whether renting and investing the monthly difference better serves their long-term financial goals.

What is your gut telling you about renting vs. buying?

The final question goes beyond spreadsheets, asking buyers to evaluate their personal readiness for the obligations that come with ownership.

Fidelity described homeownership as a source of pride and satisfaction, but also as a sustained obligation requiring genuine long-term commitment.

Roughly 85% of American homeowners spent money on at least one unplanned repair during 2025, and half reported needing work they could not afford.

Those findings come from a Clever Offers report that highlights the unpredictable and ongoing financial burden that ownership places squarely on individuals rather than landlords.

Buying a home requires stable income, manageable debt, long-term plans, and realistic expectations about costs and property values.

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Fidelity’s checklist puts the decision back on the buyer, not the market

Fidelity’s five-question framework moves the rent-versus-buy decision away from assumption and toward structured self-assessment. The checklist does not attempt to provide a universal answer because none exists. 

Income stability, time horizon, local pricing dynamics, appreciation risk, and personal temperament all carry different weights, depending on who is asking the question and when.

Related: Fidelity on the price of skipping a mortgage

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