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!
My Friend Didn’t Believe Her Husband Was Cheating, So I Set Up a Scene to Prove It
When her best friend refused to believe her husband was cheating on her, Nancy was determined to open her eyes. She set up a foolproof trap, but as the plan unfolded, Nancy was unprepared for the explosive consequences.
Alright everyone, Nancy here. Ever had that friend, the one who wears rose-colored glasses thicker than a disco ball? Yeah, that’s Melissa. Now, Melissa’s husband, Victor, is the epitome of a wolf in sheep’s clothing. Picture perfect husband on the outside, but on the inside… well, let’s just say his loyalty roams free like a stray dog…
For the past year, whispers about Victor’s little “extracurricular activities” had been swirling around town like tumbleweeds in a dusty desert.
Pub crawls with “mystery women,” extra-long “work nights” that ended way too close to sunrise at that sketchy karaoke bar on Elm Street — the signs were all there, neon bright.
But Melissa? Bless her heart, she clung to the fantasy of their “perfect” marriage like a life raft in a hurricane.
At first, it was kind of cute. You know, the “ignorance is bliss” kind of thing.
But seeing Melissa walk on eggshells around Victor, making excuses for his shady behavior, it started to grate on me. The girl was practically begging to get her heart broken!
Enough was enough.
One gloomy Tuesday evening, armed with a bottle of the strongest wine I could find and a heart full of frustration, I marched over to Melissa’s house. You know that feeling when you just gotta lay it all out, consequences be damned? That’s exactly where I was at.
Melissa opened the door with a bright smile that faltered the second she saw my stormy expression.
“Hey Nancy,” she said. “What brings you here?”
I pushed past her, the wine bottle threatening to topple over in my trembling hand. “We need to talk,” I declared.
Melissa’s smile vanished completely, replaced by a flicker of worry. We settled down on the couch, and I launched into my spiel, laying out all the rumors, the suspicious disappearances, the way Victor’s eyes lingered a little too long on other women.
But Melissa wouldn’t budge and tears welled up in her eyes. “You’re being ridiculous, Nancy,” she sniffled. “Victor would never do anything like that. He loves me.”
My frustration bubbled over. “Loves you?!” I practically shouted. “Love doesn’t involve sneaking around and hiding phone calls! Melissa, wake up and smell the coffee — or maybe the cheap perfume clinging to his clothes!”
That was the final straw. Melissa’s face hardened, her eyes blazing with hurt and anger. “This is my marriage, Nancy,” she snapped. “If you can’t be supportive, then maybe you should leave.”
My heart sank.
I hadn’t meant to drive a wedge between them, just to open her eyes. But clearly, logic wasn’t winning this battle.
Defeated, I grabbed my abandoned wine and shuffled out, the slam of the door echoing my failure in my ears.
Sitting alone in my apartment, I knew I couldn’t just leave Melissa like that, living in a fool’s paradise. But how could I break through the wall she’d built around her perfect little world?
An idea, crazy and impulsive, sparked in my mind. Maybe I could give Melissa the undeniable PROOF she needed.
With a deep breath, I grabbed my phone and dialed Victor’s number. The phone rang for what felt like an eternity before a smooth, familiar voice answered.
“Hey Nancy, this is unexpected,” Victor said, a hint of surprise lacing his tone.
Ugh, the nerve of this guy! I steeled myself, channeling my anger into a voice dripping with feigned flirtation.
“Hey Victor,” I purred, “Guess what? I got promoted! To celebrate, I’m thinking of having a little ‘get-together’ with a special friend this weekend. And guess who immediately popped into my head?”
Silence. I held my breath, willing him to take the bait.
“Well?” I pressed, trying to sound nonchalant. “Are you coming…?”
Then, a low chuckle traveled through the phone. My stomach clenched. “Well, Nancy,” Victor said, his voice smooth as silk, “I’m always up for a good time. Tell me more…”
The sound of Victor’s chuckle sent a shiver down my spine, a mix of disgust and a surge of morbid satisfaction. He’d taken the bait. Now came the tricky part.
“Actually,” I interjected, trying to sound casual, “I was thinking of something a little more… discreet.” I could practically hear the question marks forming in his head. Perfect.
“Discreet, huh?” he repeated, his voice laced with a hint of intrigue. “What did you have in mind?”
I took a deep breath. This was it. “There’s this new upscale pub downtown,” I said, dropping the name of the very same pub he frequented with his “other women.” “Heard it’s got a private room, perfect for a little… celebration.”
A beat of silence followed. Then, a low whistle came through the phone. “Now that’s interesting, Nancy,” Victor said, his voice a touch huskier. “Are you sure about this? You know, Melissa…”
“Don’t worry about Melissa,” I cut him off. “She won’t know a thing… I promise. It’ll be just you and me.”
There was another pause, longer this time. My heart pounded in my chest. Was he suspicious? Had I blown the whole operation?
Finally, Victor spoke. “Alright, Nancy,” he purred. “You’ve convinced me. Just tell me what time, and I’ll be there… in your arms, darling.”
Relief washed over me so strong I almost dropped the phone. He’d agreed! My gamble had paid off. “Great!” I said, forcing a light tone. “I’ll text you the details later. Just make sure you come alone, okay?”
“Wouldn’t dream of it,” Victor chuckled. “See you then, babe.”
With that, the line went dead. I stared at the phone, elation and dread bubbling in my stomach. I’d set the trap, but now what? Would Melissa actually believe me? More importantly, would she be strong enough to face the truth, however ugly it might be?
With a mischievous grin, I fired off a text to Melissa, apologizing profusely for my outburst the other night.
“Ugh, Nancy,” she replied, her message dripping with annoyance. “Can we talk about this later? I’m swamped right now.”
I wasn’t about to give up. I bombarded her with messages, each one brimming with fake remorse and a desperate plea to meet for drinks.
“Come on, Mel,” I texted, “Let’s just grab a quick drink and clear the air. My treat! This Saturday. Please.”
Finally, on Friday afternoon, I received a one-word reply: “Fine.”
Victory! Saturday arrived. Today was the day I’d expose Victor for the lying, cheating weasel he was. I spent hours primping, slipping into the most elegant dress I could find.
Walking into the upscale pub, I felt completely out of my comfort zone.
As promised, Victor was already there, perched at the bar, nursing a drink on the rocks. His eyes lit up when he saw me.
“Nancy,” he exclaimed, a smooth smile gracing his lips, “you look absolutely… like a goddess.”
I plastered on a sheepish grin. “Thanks, Victor,” I purred, forcing down the wave of disgust rising in my throat. “Mind if I join you?”
He gestured to the empty stool beside him. We settled in, making awkward small talk as the bartender mixed me a drink. Victor kept stealing glances at me, a flicker of suspicion replacing his initial amusement.
“So,” he finally started, his voice laced with curiosity, “what’s with the sudden change of heart, Nancy? You’re usually not one for crowded bars or… well… me.”
Busted. I cleared my throat, mentally scrambling for a convincing story.
“Honestly, Victor,” I confessed, batting my eyelashes for effect, “I’ve been kicking myself ever since the dinner the other night. You were so kind, so attentive… it awakened something in me.”
Victor’s eyebrows shot up. This was it. Time to reel him in.
I leaned closer, “Maybe,” I said, my cheeks burning with shame, “I was a little afraid to act on my feelings before. But hey, life’s too short, right?”
A slow smile spread across Victor’s face. He scanned me from head to toe, his gaze lingering a little too long on certain curves. I felt a wave of nausea roll through me, but I pushed it down. This was all for Melissa.
Suddenly, my phone buzzed in my purse. A text from Melissa. My heart raced. “On my way,” it read
I quickly typed out a one-line reply: “Come straight to the bar.” Sliding my phone back into my purse, I took a deep breath.
Just then, the pub door swung open and Melissa walked in.
My cue. I threw my arms around Victor’s neck and leaned in for a kiss. “Kiss me, you fool!” I whispered dramatically.
Victor, clearly flustered, hesitated for a split second before returning the kiss. It was a clumsy, awkward peck, but it was enough. I pulled back, a triumphant smile lighting up my face..
“See, Melissa?” I declared, turning towards my friend.
“This is what I’ve been talking about! Your husband’s a complete jerk!”
The smile vanished from Melissa’s face, replaced by a mask of shock and sheer disbelief. Victor, however, sputtered to his feet, his face flushed crimson.
“Melissa, honey,” he stammered, “it’s not what it looks like! She’s the one who—”
“Don’t even try to lie your way out of this, Victor!” I cut him off, relishing the momentary power shift. “The jig is up!”
But before I could launch into a full-blown exposé, Victor whipped out his phone. A sickening feeling of dread crept into my stomach. He pressed a button, and a voice filled the air — my voice. Crystal clear, unmistakable.
“Hey Victor,” the voice purred, “guess what? I got promoted! To celebrate, I’m thinking of having a little ‘get-together’ with a special friend this weekend. And guess who immediately popped into my head?”
My blood ran cold.
The voice on the phone was mine, the exact words I’d used to set the trap. Victor had recorded our conversation. I was caught, my elaborate plan backfiring spectacularly.
“See, honey,” Victor finished, his voice dripping with false sincerity, “I told you she was the one coming on to me. I’m innocent. I just came here for a drink. It was all her.”
Melissa’s face contorted with anger and confusion. She looked between me and Victor, her gaze lingering on the phone in his hand. The silence stretched on, thick and suffocating.
“NANCY,” Melissa yelled, “is this… TRUE??”
My throat constricted. I wanted to scream, to explain, but the words wouldn’t come.
The weight of my actions pressed down on me, heavy and suffocating. Shame burned in my cheeks, hotter than any cocktail I’d ever tasted.
“I…” I stammered. “I just… I wanted you to see—”
“See what?” Melissa cut me off, her voice rising.
“See you ruin my marriage with your lies and accusations? You almost made me throw away the best thing that ever happened to me, all on the basis of some twisted suspicion!”
Tears welled up in her eyes. “You call yourself my best friend? This is how you treat me?”
I opened my mouth to apologize, but the words died in my throat. Melissa was right. My misguided attempt at helping had backfired spectacularly. I’d hurt her, betrayed her trust, and all for nothing.
Victor, sensing his advantage, placed a comforting hand on Melissa’s shoulder. “There, there, honey,” he murmured. “Don’t listen to her. She’s clearly jealous of what we have.”
Melissa shot him a watery smile, leaning into his touch. My stomach churned. Had I been so blinded by my suspicion that I’d missed the genuine affection between them? Or was Victor that good of an actor?
“Get out of my life, Nancy,” Melissa yelled. “And don’t you ever contact me again.”
There was no denying the finality in her voice. Tears streamed down my face as I watched Melissa stumble out of the bar with Victor in tow.
A week had passed since that fateful night. The silence from Melissa was deafening. My calls went unanswered, my texts left on read. Social media confirmed my worst fear — I was blocked.
Sitting alone in my apartment, replaying the scene over and over in my head, I felt a wave of self-loathing wash over me. I’d messed up, royally.
So, am I wrong? The answer, unfortunately, is clear. Yes. Yes, I was wrong. Dead wrong.
My intentions, while misguided, may have stemmed from a place of care. But the way I went about it? A complete disaster.
You know, I get it. Looking back, my whole plan to expose Victor was a dumpster fire wrapped in a trainwreck. But honestly, do you think I was the villain here? Sure, I messed up, big time. But Melissa deserved to know the truth, right? Or was I way out of line for meddling? Hit me with your thoughts.
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