For most people, their first home isn’t their dream home. It starts off nice enough. But as time goes by and your family grows, starter homes tend to get a little . . . cramped.
But don’t hate on your current home too much. Because while it gave you a safe and dry place to lay your head at night, it was also setting you up to own your dream home someday.
We’ll show you how it all works and walk you through the steps that’ll get you in your dream home—one you can actually afford!
How to Get Your Dream Home in 5 Steps
Here are the steps:
- Follow the Financial Basics
- Find Out How Much Equity You Have
- Set Your New Home-Buying Budget
- Find the Right Dream Home for You
- Be Picky and Patient
Now let’s cover each step in more detail.
Step 1: Follow the Financial Basics
First thing’s first—you have to get out of debt, get on a budget, and build up an emergency fund of 3–6 months of expenses. Sounds pretty basic, right? If you haven’t completed these steps, then you’re not ready to upgrade to your dream home . . . yet.
Now, when you’ve got house fever, it can be hard to focus on paying off debt or saving an emergency fund before you upgrade your home—especially when you’re feeling the pressure of rising home prices and interest rates.
But whether it’s your second or third house, you should only buy a home when you’ve covered the financial basics we mentioned above. Then you’ll be ready to start the journey toward owning your dream house.
And that journey starts with your home equity. What’s equity? Well, we’re glad you asked . . . that brings us to the next step.
Step 2: Find Out How Much Equity You Have
Home equity is a pretty simple concept: It’s your current home’s value minus whatever you still owe on your mortgage.
See, in most cases, your home’s value increases over time. Similar to other long-term investments (like retirement accounts), homes gradually increase in value. There have been periods of ups and downs in the market to be sure, but the value of real estate has consistently gone up. According to the St. Louis Federal Reserve, the average sale price of a home has increased over 2,300% from 1965 to 2023! And in the last ten years (2013 to 2023), there’s been a 68% increase.1 As your home increases in value, so does your equity. In real estate terms, this is called appreciation.
Other factors that increase your home’s equity include:
- Added value: Home improvement projects like adding square footage, updating fixtures and appliances, or even just slapping on a new coat of paint can add value to your home.
- Mortgage paydown: Paying down your mortgage not only gets you out of debt faster, it also builds your equity. The less you owe on your home, the more equity you have.
The amount of equity you have gives you a pretty good idea of how much money you’ll end up with after selling your house. You can use that money to make a hefty down payment and cover the other costs that come with buying a home.
Find expert agents to help you buy your home.
So, how do you determine your home’s value? Well, you can get a ballpark estimate on real estate websites like Zillow, ask a trusted real estate agent to perform a competitive market analysis (which they’ll do anyway if they’re helping you sell your house), or get a professional appraisal.
Finding out your home’s equity will involve a little math, but it’s third-grade-level stuff, so don’t sweat it.
Here’s what we mean. Let’s say your home’s current value is $355,000. When you sell that house, you’ll have to pay for between 1–3% of the sale price in closing costs, another 6% in fees for the real estate agent who helped you sell it, and whatever’s left to pay off on your mortgage.
That means you can estimate clearing over $223,000 from selling your house. That’s a killer down payment on your dream home! And if your home is paid off, that’s even more money to put down and use to pay for things like repairs and moving expenses.
Step 3: Set Your Dream Home Budget
Once you know how much you’ll clear from the sale of your home, you can start making a budget for your dream home.
The key to owning your dream home (instead of it owning you) is to keep your mortgage payment to no more than 25% of your take-home pay on a 15-year fixed-rate mortgage, along with paying a down payment of at least 20% to avoid private mortgage insurance (PMI). Never get a 30-year mortgage even if the bank offers it (and they will). You’d pay a fortune in interest—money that should go toward building your wealth, not the bank’s.
So, let’s say your take-home pay is $4,800 a month. That means your monthly mortgage payment shouldn’t be any bigger than $1,200. By the way, that 25% figure should also include other home fees collected every month with the mortgage payment like homeowners association (HOA) fees, insurance premiums and property taxes.
Plug your numbers into our mortgage calculator to see how much house you can afford.
And don’t forget to budget for all those other costs that come with the home-buying process in addition to your closing fees—things like moving expenses and any upgrades or repairs you might need to make. You don’t want these hidden costs to catch you off guard or drain your emergency fund.
Step 4: Find the Right Dream Home for You
This is where things get real. After all your hard work building up your equity (and doing a lot of math—don’t forget that), you’re finally ready to start the house hunt. Woo-hoo!
But don’t lose focus. Stay zoned in by making a list of features that make a home fit your budget, lifestyle and dreams—and stick to it throughout your house hunt. Here are a few ideas to get you started.
- Don’t compromise on location and layout. If you plan to be in this home for the long haul, an out-of-the-way neighborhood or a wacky floor plan is a deal breaker. Look for a community and layout that’ll suit your lifestyle now and for years to come.
- Think about how much space your family needs. While your budget has the final say about how much home you buy, you’ll want your dream home to fit your family’s needs through different life seasons.
- Consider the school districts. If you have or want kids, the quality of the nearby school districts is probably already on your mind. But even if you don’t have kids or you’re retired, keep in mind that having good schools nearby could increase your home’s value.
- Look for a house that’ll grow in value. Are home values rising in the area? Is the number of businesses going up? These factors can help you figure out whether your dream home will turn into a good investment.
- Count the costs. Want that fancy master bathroom with the multiple showerheads and the Jacuzzi tub? Be clear on what’s a must-have and what’s nice to have. And don’t forget, upgraded features like that will make your dream home more expensive.
Step 5: Be Picky and Patient
We know you’re anxious to get into those new digs, but be patient. Wait for the right house at the right time. Don’t spend your money on a less-than-ideal home just because you’re tired of looking.
The key is finding a good real estate agent who understands your budget and refuses to settle for “good enough.” They’re as committed to your dream as you are and will have your back throughout the entire process, no matter what it takes.
In addition to teaming up with a great real estate agent, you can take a couple of extra steps to make sure you’re ready to strike as soon as the right home comes up:
- Get preapproved for a 15-year fixed-rate mortgage. Having preapproved financing is a green flag for sellers—especially in multiple offer situations. And because this puts most of your information in the lender’s system, you’ll be on the fast track to closing once your offer is accepted.
- Offer earnest money with your bid. Earnest money is a deposit to show you’re truly interested in a home. Usually it’s 1–2% of the home’s purchase price and it’s applied to your down payment or closing costs. Even if the deal falls through, you can almost always get most of it back.
Find a Real Estate Expert in Your Local Market
Now, you might be thinking you have some work to do before you’re ready to find your dream home. Or you may be realizing your years of hard work are about to pay off! Regardless, if you follow these steps, you’ll find the house you’ve always wanted and avoid a purchase you’ll regret.
Once you’re ready, connect with one of our RamseyTrusted real estate agents. These are high-performing agents who do business the Ramsey way and share your values so you can rest easy knowing the search for your dream home is in the right hands.
Find the only real estate agents in your area we trust, and start the hunt for your dream home!
Rich Man Accidentally Meets Little Girl Who Is His Carbon Copy, She Begs Him to Help Her Mom — Story of the Day
Alex was sitting in the park, lost in thought when he was interrupted by a voice from behind. “Please help my mother!” it begged. When Alex turned around, he saw a little girl crying bitterly. Alex was frozen in place by the mere sight of her. She looked so much like him!
Why did you do that, Charlotte? Why didn’t you just tell me you weren’t happy with me? Alex sighed as he reflected on the events of the previous night.
He’d arrived home early from work to surprise his wife on their wedding anniversary. But all of his excitement was dashed when he discovered her in their bedroom with another man. The man was holding her waist, and her arms were wrapped around him. After a brief moment, they clasped hands, kissed passionately, and didn’t stop until Alex barged into the room.
For illustration purposes only. | Source: Pexels
“Is this what you do behind my back, Charlotte?” he lashed out at his wife, still holding the bouquet and cake he’d brought for the special day. “You’re cheating on me with a man half your age?!”
Charlotte, who didn’t expect Alex to be home so soon, was taken aback by his presence. “Oh, Alex…I…”
“You have one hour to leave this place, Charlotte, with that man! Run away as far as you can! I don’t want to see you again,” he threatened her and left the room. Then he ordered the guard to go into the house and make sure that behind his back, Charlotte didn’t take anything extra from his home.
Alex got into his car and drove all night aimlessly, stopping only once to refuel. Then, as his fuel gauge reminded him that he needed to fill up, he pulled over to a park and sat on a bench, lazy to go to the station again.
A quick glance at his wristwatch revealed that it was around 6 a.m. The park was as deserted as a cemetery, and he was glad he was alone there because the sad thoughts of his wife cheating on him hadn’t left him even after the long drive. He soon covered his face with his hands, attempting to calm himself and get over the events of the previous night.
Perhaps she never wanted a relationship. Maybe she was always after my money, he pondered.
Suddenly, a sobbing sound from behind interrupted his thoughts. “Sir, can you please help me? My mother needs help!” it said.
For illustration purposes only. | Source: Pexels
Turning around, Alex noticed a small child holding a teddy bear. The sun had nearly risen, and the rays falling on the girl’s face froze Alex in place. No way! This isn’t possible! She can’t be… Wake up, Alex! You’re imagining things because you didn’t sleep last night!
“Sir,” she said again, pulling his jacket closer to her. “Please help my mom!”
What if she’s a member of one of those gangs that threaten and rob people? After all, what is she doing here alone at this hour of the morning?
“Umm…where is your mom? And what happened to her?” Alex asked, looking around for anything suspicious, but when he didn’t see anything dubious, he hurried after the girl.
As she walked to the back of the park and into the abandoned forest, Alex was constantly keeping his eye out, waiting for someone to jump out from around the corner and force him to hand in everything in his pockets. However, other than his car keys and a phone, he had nothing else to offer at the time.
As they moved deeper into the forest, the girl came to a halt in front of a massive oak tree. She then turned to Alex and motioned with her hands to the tree. “My mom… she’s there. She needs help!”
Seeing a human’s hand protruding from one corner of the tree, he quickened his pace and found a woman lying there unconscious. Squatting next to her, he touched her hand to check for a pulse. She was still alive and breathing, but her body was sweltering. He gently turned her over on her back and froze in shock once again. The woman was his first love, Camilla.
For illustration purposes only. | Source: Pexels
He immediately dialed 911 and requested that an ambulance be dispatched to the scene. Then he dashed to his car to get his water bottle.
Having splashed water on the woman’s face, he tried to bring her to her senses, but she began shaking from the cold. He took off his jacket and wrapped it around her, holding her tightly in his arms.
“How did your mom come here, sweetie?” he asked the little girl, trying to control the tears in his eyes at having doubted her. “Where’s your father?”
“I don’t have anyone other than my mother,” the girl sniffed. “Will mommy be alright?”
“Of course she will!” Alex comforted the child.
When the ambulance arrived, the doctors examined Camilla quickly and loaded her onto a stretcher. They didn’t even ask Alex if he knew Camilla. “Is the child staying with you?” asked the orderly quickly. Alex nodded in agreement.
The little girl cried and asked to join her mother, but Alex promised her that he would definitely take her to her mother when she gets better. “I know your mom. She and I were close friends once, so don’t worry, okay?” he said gently. But the girl looked at him incredulously as they both walked to his car to head home.
When they arrived, Alex ordered the housekeeper to look after the little girl then left for the hospital. When Camilla awoke, she was shocked to see Alex at her bedside. “You? What are you doing here? And where’s my daughter?”
For illustration purposes only. | Source: Shutterstock
“Please, Camilla, calm down. She’s at my house and safe. I can video call her right now if you want.”
“Yes! Do that!” Camilla cried. “I want to see her!” Camilla didn’t rest until she saw and spoke with her daughter on the phone. Once the call was over, she burst into tears. “I’m sorry for doubting you, Alex, but I really have none other than Kate in my life.”
“It’s all right, Camilla. For the time being, you should rest. The doctors said it was pneumonia, and you’re lucky your fever went down; otherwise, they’d have to keep you in the intensive care unit… By the way, how did you end up in the forest?”
“Actually, I always take that route because it’s like a shortcut to Kate’s kindergarten,” she admitted, her voice trembling with embarrassment. “I start early in the morning to save money on bus fare. It is difficult to raise a child on one’s own.”
“But where’s her father? Why doesn’t he take responsibility for his child?” Alex asked curiously.
Camilla fell silent. “Well…” Before she could say anything, doctors walked into the room and asked Alex to leave. They said Camilla would be under observation for a few days.
For illustration purposes only. | Source: Pexels
During Camilla’s stay at the hospital, Alex visited her every day and looked after her. When she was discharged, he took her home, and during that phase, they became close involuntarily.
Meanwhile, Alex was constantly bothered by the thoughts of why Kate resembled him so much. He felt a strange affection for the young girl and he wanted to ask Camilla if his suspicion was true and Kate was his daughter. So he decided that after Camilla recovered completely, he would sit with her and talk about it. But fate had different plans.
One day, as he and Camilla were about to leave the house for a check-up, they ran into Charlotte, who’d come to discuss the divorce settlement with Alex.
Imagine her shock when she spotted her husband’s ex-lover at the house. “Oh! So you’re back together now? Is she the reason you were so eager to get rid of me, Alex, without even giving me a chance to explain myself?” She sneered.
“Well–” Before Alex could say anything, little Kate came running and hugged Alex. “Let’s go! But the doctor won’t give me those tablets, right?” she asked Alex curiously.
“Woah! Look at you! Aren’t you happy after kicking me out of the house? You have your lover and your daughter with you. What else do you want?” Charlotte mocked.
For illustration purposes only. | Source: Pexels
“What?” Alex turned pale upon hearing Charlotte’s remark. “My daughter?” He looked at Camilla, who quickly averted her gaze and looked down.
“Oops! Looks like someone didn’t tell you the truth!” Charlotte added.
“Can someone tell me what’s going on?” Alex asked, dumbfounded.
“I’ll tell you everything, Alex,” Camilla said in a quiet voice. “You go inside and play, honey. Mumma will come soon,” she added, turning to Kate, who happily followed her mom’s instructions and went inside. Then Camilla revealed the whole story to Alex.
It turns out Charlotte always knew Kate was Camilla and Alex’s child. She liked Alex a lot and decided to drive a wedge between him and Camilla. Hence, she asked one of her friends to take false photographs of Camilla with another man to convince him that Camila was cheating on him.
Alex was heartbroken when he saw those photographs of Camilla hugging and kissing another man and broke up with her. Charlotte saw this as the perfect opportunity and started dating Alex. They were childhood friends, after all, and their families were also convinced that they were perfect for each other. Meanwhile, Camila had not informed Alex of her pregnancy. She decided to raise their child alone after Alex left her.
For illustration purposes only. | Source: Shutterstock
“I didn’t want to break your marriage, so even after I came here, I didn’t tell you about Kate,” Camila explained. “I had no idea you and Charlotte were divorcing.”
Alex started hating Charlotte even more after learning the whole truth. He not only divorced her but also made sure she received no money from his inheritance. Later, after the divorce case was resolved, he married Camilla and they lived happily together.
What can we learn from this story?
- You always meet people because you’re destined to and not by chance. Alex was destined to reunite with his lover and daughter, and that’s precisely what happened in the end.
- Karma is unavoidable. Charlotte thought she could get away with cheating on her husband, but in the end, karma reached her.
If you enjoyed this story, you might like this one about a store clerk who kicked out a little boy who wanted to buy a doll for his dying mother.
This account is inspired by our reader’s story and written by a professional writer. Any resemblance to actual names or locations is purely coincidental. All images are for illustration purposes only. Share your story with us; maybe it will change someone’s life.
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