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!
I Found My Wife Locked in the Cellar When I Returned Home from a Business Trip
When Michael returned home early from a business trip, he expected a warm family reunion, not an empty house and eerie silence. His wife was missing, only to be found locked in the cellar, with a shocking story that pointed to a betrayal he never saw coming.
It was supposed to be a regular business trip, but I managed to wrap things up early. I couldn’t wait to get home to my wife and kids. I imagined the look on their faces when they saw me walk through the door, two days ahead of schedule. The thought made me smile as I drove up our quiet street.
Michael driving home | Source: Midjourney
I’m 32, and my wife, Emma, is 27. We’ve been married for seven years, and we have two kids—Liam, who’s 8, and Sophie, who just turned 5. Emma stays home with them, handling the endless list of chores and making sure the house runs smoothly. I work long hours, so these surprise homecomings are my way of showing them I’m still around, still present in our family life.
I pulled into the driveway, noticing how still the house was. Strange, since it was a Saturday, and the kids should have been playing outside or watching TV. I grabbed my bag, eager to see them, and walked to the front door.
An empty house | Source: Midjourney
“Emma? Liam? Sophie?” I called out as I stepped inside, expecting their excited voices to greet me. But there was nothing—just silence.
I began searching the house. “Emma?” I called again, louder this time, checking every room. The kids’ rooms were empty, their beds neatly made. The bathroom, the living room—nothing. My heart started to race. Where were they?
An empty kid’s room | Source: Midjourney
As I stepped into the garage, I heard it. A faint noise, like someone banging on a door. I froze, listening hard. The sound was coming from the cellar.
“Help!” It was Emma’s voice, muffled but desperate. I bolted toward the cellar door, my heart pounding.
“Emma! I’m here! Hold on!” I shouted, fumbling with the lock. The door creaked open, and I saw her at the bottom of the stairs, her face pale, her eyes wide with fear.
Michael trying to unlock the cellar | Source: Midjourney
“Oh my God, Emma! What happened? Where are the kids?” I blurted out, rushing down the stairs to her.
Emma’s hands shook as she tried to catch her breath. “It’s—it’s your mother,” she stammered, her voice trembling.
“My mother? What are you talking about?” My mind was spinning. This didn’t make any sense.
Scared Emma | Source: Midjourney
“She came over… with the kids. We were playing hide and seek, and I hid down here. But then—” Emma paused, her eyes filling with tears. “I heard the door lock. I couldn’t get out. I was stuck here for hours. I thought—” She broke off, sobbing.
I pulled her into a hug, trying to calm her down. But my mind was reeling. My mother? Locking Emma in the cellar? Why would she do that? And where were Liam and Sophie?
“We need to find the kids,” I said, my voice firmer now, trying to focus on the immediate problem.
Emma nodded, wiping her tears. “We need to go to your mother’s house. That’s where they’ll be. She—she took them there.”
“Alright,” I said, still in shock but trying to stay composed. “Let’s go.”
Scared Emma talking to Michael | Source: Midjourney
I helped her up the stairs, both of us moving quickly but cautiously. We needed answers, and we needed them now. But deep down, I feared the answers we were about to get would only lead to more questions.
As we left the house and got into the car, the weight of what Emma had said sank in. If my mother was behind this, what had really happened while I was gone? And more importantly, what was I going to do about it?
Concerned Michael | Source: Midjourney
We drove in silence, the tension between us thickening with every passing mile. I didn’t know what to say. I didn’t know what to think. All I knew was that things were about to get a lot more complicated.
As we sped toward my mother’s house, Emma finally began to calm down enough to talk. Her voice was still shaky, but she was determined to explain.
Sad Emma | Source: Midjourney
“It all started when your mom came over yesterday,” Emma said, staring out the window. “She wanted to take the kids for the weekend, but I told her no. We had plans, and I thought it would be better if they stayed home.”
I nodded, listening carefully, though my mind was racing. This was the first I’d heard about any of this. Emma went on, her voice tightening with anger.
Mother-in-law talking to Sophie | Source: Midjourney
“She seemed fine at first, but then she suggested playing hide-and-seek. I thought it was just a game, so I went along with it. I hid in the cellar, thinking it’d be the perfect spot. But then… I heard the door close. And the lock. I was stuck. I yelled and pounded on the door, but no one came.”
Emma paused, her hands gripping her knees. “It was hours before I heard anything. I was scared, angry, and confused. I couldn’t understand why your mom would do this to me. Then it hit me. She was punishing me because I wouldn’t let the kids go with her.”
Scared Emma in the cellar | Source: Midjourney
I couldn’t believe what I was hearing. My mother? Doing something like this? It didn’t add up. But Emma was clearly convinced. “I was down there for fifteen hours, Mike. Fifteen hours with nothing but my thoughts, thinking she did this to me on purpose.”
My heart sank. This was serious. But I couldn’t wrap my head around it. My mom loved Emma—or at least, I thought she did. How could she lock her in a cellar out of spite?
Upset Michael driving | Source: Midjourney
We arrived at my mother’s house. The sight of Liam and Sophie playing in the front yard was a small relief, but it didn’t last. Emma was already out of the car, marching up to the front door. I hurried after her, the tension between us like a storm about to break.
My mother opened the door, her face lighting up with surprise. “Michael! What a surprise! I didn’t know you were coming home early!”
But before I could respond, Emma burst out, “Why did you do it? Why did you lock me in the cellar?”
Emma shouting at her mother-in-law | Source: Midjourney
My mother’s smile faded instantly, replaced by a look of genuine confusion. “What are you talking about? I didn’t lock you in the cellar. I would never—”
“Don’t lie!” Emma’s voice cracked with emotion. “I know it was you. You wanted the kids to come here, and when I said no, you… you left me there!”
“Emma, calm down,” I said, though I was struggling to keep my own emotions in check. I turned to my mother, searching her face for any sign that she was hiding something. “Mom, did you lock Emma in the cellar?”
Angry Michael | Source: Midjourney
My mother looked horrified. “Of course not! I swear, Michael, I have no idea what she’s talking about.”
Before I could say anything else, a small voice interrupted us. “Mommy?”
We all turned to see Sophie standing in the doorway, looking up at us with wide eyes. “Mommy, are you mad?”
Sad Sophie in the doorway | Source: Midjourney
Emma knelt down, trying to soften her tone. “Sophie, honey, did Grandma do something? Did she lock Mommy in the cellar?”
Sophie shook her head quickly. “No, Mommy. It was me.”
The words hung in the air, and for a moment, none of us could speak. Finally, I managed, “What do you mean, sweetheart?”
Sophie’s eyes filled with tears. “Liam and I wanted to go to Grandma’s. But you said no, so I… I locked you in the cellar. I thought… I thought if you weren’t there, we could go.”
My mother gasped, putting a hand to her mouth. “Oh, Sophie, why didn’t you tell me?”
“I didn’t want you to be mad at me,” Sophie sniffled. “I told Grandma you went to a friend’s house, so we could stay here.”
Sophie crying | Source: Midjourney
I felt a mix of emotions—relief that my mother wasn’t guilty, but also frustration at the mess this had all turned into. Emma looked like she didn’t know whether to be angry or heartbroken.
“Sophie,” I said gently, “locking someone up is very serious. You scared Mommy a lot.”
“I’m sorry,” Sophie whispered, clinging to Emma. “I didn’t mean to make you sad.”
Emma hugged her tightly, and I could see the tension starting to ease from her shoulders. But the bigger issue remained.
Emma hugging Sophie | Source: Midjourney
“Mom,” I said, turning back to my mother, “we need to talk. This can’t happen again. We need to figure out how to move forward, for everyone’s sake. Or else…”
My mother nodded, still looking shaken. “Of course, Michael. I never wanted any of this.”
Emma stood up, holding Sophie’s hand. “I don’t want to fight, but we need to set some boundaries. I don’t want the kids caught in the middle of this.”
Emma and Michael having a serious talk | Source: Midjourney
I knew this was just the beginning of a long conversation. But as we all sat down together, I felt a cautious optimism. It wouldn’t be easy, but we were a family. And somehow, we’d find a way through this.
This work is inspired by real events and people, but it has been fictionalized for creative purposes. Names, characters, and details have been changed to protect privacy and enhance the narrative. Any resemblance to actual persons, living or dead, or actual events is purely coincidental and not intended by the author.
The author and publisher make no claims to the accuracy of events or the portrayal of characters and are not liable for any misinterpretation. This story is provided “as is,” and any opinions expressed are those of the characters and do not reflect the views of the author or publisher.
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