Steps toward home ownership

New Year's resolutions can be separated into two categories: those that are easier to complete, and the goals that require patience and determination. For those renters that have vowed to make 2016 the year they purchase a home, the transition from renting to buying is a long process that will not be completed overnight.

Additionally, taking those early steps can seem like a daunting task, even if other family members and friends have provided you with tips and insights into the home buying process. In your haste to complete all the paperwork, you might forget an important step.

If you are determined to buy a home sometime in the next 12 months, remember some of these steps to help you along the way.

Math matters

As a renter, your first step should be to ask yourself whether you're financially better off owning a house. However, the comparison isn't as simple as comparing monthly rent to a mortgage. Rent payments typically cover the amount for the space you're living in, and for some, utilities are part of the lease.

Homeownership is quite different. According to Zillow, four factors play a role in your monthly mortgage payments. By understanding principal, interest, taxes and insurance, you'll figure out how much you can afford. As much as everyone wants a mansion with a swimming pool, realistic expectations have to be set.

Principal and interest will make up your monthly payment. Principal is the amount that goes toward your loan's balance, while interest is the fee for borrowing that money. Every homeowner must then pay property taxes, which will vary by state and county. Finally, mortgage lenders require insurance to help cover the costs in case your home is destroyed.

You will also need to factor in other costs, such as utilities and a potential home inspection. You'll want to commission an inspection during the buying process, and again, following any substantial home improvement projects you might complete.

All those costs might make you uncomfortable, but not all is bad. Homeowners benefit from some substantial tax benefits. For example, property taxes and interest are deductible on your annual income tax returns.

It's important to understand these benefits and true costs when comparing buying to renting. As a renter, you might not have to pay property taxes or interest, but you can't claim any tax benefits, nor can you build equity.

Create a realistic budget

One of the biggest challenges current renters face, assuming they want to become homeowners, is saving for a down payment. A good rule of thumb is to have 20 percent of the home's total for a down payment, but not all is lost if you don't have that amount.

You can put down as little as 3 percent. However, you will have to pay mortgage insurance if the down payment is less than 20 percent. While mortgage insurance is not tax deductible, you can still lower monthly obligations because of other tax deductions.

Where to start

In recent years, some young individuals have vowed to stay away from obtaining credit, as highlighted by a survey from Bankrate. This is not a smart move, especially if the goal is to buy a house.

Excellent and good credit scores are essential in securing low mortgage rates, and in order to do so, you need credit. This includes more than one credit card. As such, consider opening new accounts to further build your history. Just be aware that every time you do, your score may fall anywhere from 5 to 15 points.

By checking and building your credit score now, you will hopefully give yourself enough time to secure a low rate.

Use the first weeks of 2016 to build a checklist and look to establish your budget for a home. Understand the differences between monthly rent and mortgage payments to help create a budget.