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 a Note in My Daughter’s Backpack Saying, ‘I’m Your Real Dad, Come and See Me After School’ – I Went Pale When I Found Out Who Did It
Trent’s world unravels when he finds a cryptic note in his nine-year-old daughter’s backpack: “I’m your real dad, come and see me.” Suspicion gnaws at him, but nothing prepares him for the shocking truth he uncovers.
I stood at the kitchen sink, staring at the half-full coffee mug in my hand. The morning sun filtered through the curtains, casting a soft glow over the quiet street outside.
Mornings like this used to mean something to me — peace, warmth, the simple comfort of knowing Lily was just upstairs, getting ready for school. But lately, things felt different.
A man staring out his kitchen window | Source: Midjourney
I set the mug down with a sigh, listening to the faint sound of Lily’s footsteps from above. She used to charge down the stairs, her hair a mess, talking a mile a minute about her dreams or whatever happened at school the day before.
Now? Now, she dragged her feet, barely speaking, like there was a weight on her shoulders.
Something was wrong, and it worried me.
A worried man | Source: Midjourney
“Lily,” I called, hoping for some kind of response that would ease the tension. “You want pancakes? I can make some before you go.”
“Not hungry,” she muttered from the top of the stairs, her voice as flat as it had been for weeks.
I winced. She hadn’t sounded like that before: so sharp, so cold. It wasn’t like her at all. Drying my hands, I turned to face her as she came down.
“Hey, kiddo, what’s going on? You’ve been kinda quiet lately.”
A man standing at the foot of the stairs | Source: Midjourney
She shrugged, still not meeting my eyes. “Nothing.”
I hated that response. She used to tell me everything, but now it felt like she was shutting me out. She pulled on her backpack and moved toward the door like she couldn’t wait to leave.
“Lily, wait.” My heart was in my throat. I hated how distant she’d become, and it frightened me more than I wanted to admit. “You know you can talk to me, right? About anything.”
She paused with her hand on the doorknob.
A girl standing by the front door | Source: Midjourney
For a second, I thought maybe she’d turn around and open up to me. But then her shoulders stiffened, and she just nodded.
“Yeah. I know.” Her words were hollow, as if she didn’t believe them herself. She opened the door and slipped out without another word.
I stood there in the silence, feeling it close in on me. Something was wrong. I just didn’t know what it was yet.
A worried man | Source: Midjourney
That afternoon, I was going through the laundry, like I always did on the weekends. Lily had tossed her backpack onto her bed, and it looked like it had survived some kind of battlefield.
I figured I’d clean it out before throwing it in the wash, so I started digging through the mess of crumpled papers and snack wrappers. That’s when I found the note.
A folded piece of paper slipped out of the side pocket, so worn that it was practically falling apart.
A folded note | Source: Midjourney
I stared at it for a second before unfolding it, something heavy settling in my chest.
“I’m your real dad. Come and see me last Monday of September behind the school.”
My heart stopped. The words blurred for a second and it seemed like my brain couldn’t process what they meant. Real dad? What the hell was this?
I was Lily’s dad… I’d raised her since the day she was born.
A shocked man | Source: Midjourney
Kate, my wife, who’d been gone for six years now, wouldn’t have kept something like this from me. She loved me. She wouldn’t have cheated on me.
Would she?
I felt sick to my stomach. The note wasn’t just some random thing. It felt targeted. Like someone knew exactly how to hurt me, using Lily to get to me. But who? And why?
I wanted to confront Lily right then and demand answers.
A confused man | Source: Midjourney
But something stopped me. I couldn’t do that to her, not yet.
The note said to meet on the last Monday of September, which was in two days. I needed to know who was behind this.
Two days later, I was sitting in my car, watching the school. I hated doing this; following my daughter like some kind of detective, but I had no choice. I needed to know what was going on.
A man sitting in his car | Source: Pexels
I watched as Lily walked slowly to the back fence of the school, her shoulders tense, like she knew this wasn’t right. And then I saw him: a tall guy, slouching a little, standing by the fence. It took me a second, but when I realized who it was, my blood ran cold.
Jeff. A guy I knew from work. He’d always been quiet and kept to himself, but I never thought much about it.
Until now.
A man leaning against a fence | Source: Midjourney
Lily hesitated for a moment before walking up to him. I cracked the window, just enough to hear their voices.
“You came,” Jeff said, his voice low and almost too calm. “I wasn’t sure you would.”
Lily didn’t respond, but I could see her fidgeting with the straps of her backpack. She was nervous. I could feel it from where I was sitting.
“I know this is a lot,” Jeff continued, his voice gentle in a way that made my skin crawl. “But your mom wanted you to know the truth. She didn’t want to hurt you. Or… him.”
A man talking to a girl | Source: Midjourney
I couldn’t just sit there anymore. I pushed the car door open and stormed toward them, my heart pounding so hard I thought it might explode. “What the hell is going on here?”
Jeff flinched, his face tightening for a second before he composed himself. “Trent. I was hoping we could talk about this.”
“Talk?” My voice shook with rage. “You think you can just show up and tell my daughter you’re her father?”
A shouting man | Source: Midjourney
Jeff glanced at Lily, who looked more confused than I’d ever seen her, and then back at me. “She deserves to know. Kate and I… we had something. Lily is my daughter.”
I couldn’t believe what I was hearing. My hands clenched into fists, my whole body shaking with disbelief. “No. You’re lying. Kate wouldn’t do that to me. She wouldn’t keep that from me.”
“She didn’t want to hurt you, Trent.” Jeff’s voice was so calm, so sure of himself. “She thought it was for the best.”
A man and a girl | Source: Midjourney
I turned to Lily, my heart breaking at the look on her face: wide-eyed and terrified. “Lily, don’t listen to him. He’s lying.”
Lily’s voice was barely a whisper, but it cut through me like a knife. “Is it true? Dad… is it true?”
I dropped to my knees in front of her, my hands resting on her arms. “It doesn’t matter what anyone says. I’m your dad. I’ve been there every day of your life. That’s what makes me your father. Nothing else.”
A girl standing near a fence | Source: Midjourney
She didn’t say anything, just stared at me, her lip quivering. I could feel her shaking beneath my hands, and it killed me to see her like that. I turned back to Jeff, my rage flaring again.
“Get out of here.”
Jeff sighed, looking almost sad. “I know this is hard, but I’m not going anywhere. She deserves to know the truth.”
“You’re not her father,” I growled, barely holding back my anger. “You never will be.”
A man shouting | Source: Midjourney
Jeff gave me one last pitying look before turning and walking away. I wanted to chase him, to demand answers, but Lily’s small sob pulled me back.
I wrapped my arms around her, holding her as tightly as I could. I wouldn’t let anyone hurt her. Not ever.
That night, I lay in bed, staring at the ceiling, my mind racing with thoughts I didn’t want to have. Could it be true? Could Kate have hidden something like that from me?
A man lying in bed | Source: Pexels
I thought about every moment we’d shared, every laugh, every conversation. Nothing made sense anymore.
The next day, I started digging into Jeff’s past. I couldn’t just sit around waiting for answers. I needed to know the truth.
It didn’t take long to find out that Jeff had been fired from our company a month ago for lying on his résumé.
A man using his laptop | Source: Pexels
He had a history of manipulation, of using people to get what he wanted. The relief I felt was overwhelming. He’d lied about everything.
A few nights later, Lily and I were sitting on the couch, watching some show that neither of us were really paying attention to. I knew I had to talk to her. She deserved to know the truth.
“Lily,” I said softly, “we need to talk about Jeff.”
A girl sitting on a sofa | Source: Midjourney
She tensed, curling a little closer to me, but she didn’t say anything.
“He lied to you, kiddo. About everything. Jeff is not your real dad. He’s just… sick. He was trying to hurt us.”
Lily looked up at me, her eyes wide and scared. “But… what if it’s true?”
“It doesn’t matter what he said,” I told her, pulling her closer. “I’m your dad. I’ve always been your dad, and nothing will ever change that.”
A worried girl | Source: Midjourney
She stared at me for a long moment, her lip trembling, and then she nodded. “I love you, Dad.”
“I love you too, kiddo. Always.”
A few days later, I got a call from the police. Jeff had been arrested for stalking another family. Turns out, the guy had a history of lying and manipulating people. It was over. I hung up the phone, feeling like I could finally breathe again.
A man standing in his home | Source: Midjourney
Lily was at the kitchen table, drawing quietly. I walked over and kissed the top of her head. We were going to be okay.
We had to be.
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