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!
After Years of Waiting, a Woman Decides to Propose to Her Boyfriend Herself, but His Response Is Even More Unexpected — Story of the Day
After five years of dating, Charlotte decides it’s time to take the leap and proposes to Peter during a cozy dinner. As curious eyes in the restaurant turn toward them, his stunned and hesitant reaction leaves her questioning everything she thought she knew about their future.
Charlotte sat on the edge of the bed, the morning light filtering through the thin hotel curtains.
The phone pressed against her ear felt heavier with each word from her mother.
“Mom… I don’t know…” she repeated softly, her voice cracking with frustration.
“What do you mean you don’t know?!” her mother snapped on the other end. “Charlotte, you’ve been with Peter for, what, five years now?”
“Five years and three months,” Charlotte murmured, as if the exact number might defend her case.
For illustration purposes only. | Source: Midjourney
“And still no proposal? Charlotte, you’re 33 years old! How much longer do you plan to walk around unmarried? At this rate, I’ll never see grandchildren,” her mother continued, her tone sharp and unwavering.
Charlotte bit her lip, the ache in her chest growing.
“When Peter planned this two-week trip, I really thought… I thought this was it, Mom. I thought he’d propose.”
“And now this trip is nearly over,” her mother cut in.
“The day after tomorrow, you’ll be home, and what do you have? Nothing but your grandfather’s ring, which should already be on your husband’s finger by now.”
For illustration purposes only. | Source: Midjourney
“Mom, please,” Charlotte said, the weight of the conversation pressing down on her. “I know the story. You’ve told it a hundred times.”
“Don’t interrupt me, Charlotte! That ring is meant for your husband, and how are you supposed to pass it down if you don’t have one?” her mother snapped, her words sharp as glass.
Charlotte closed her eyes and sighed deeply.
“Alright, Mom. I get it. I’m hanging up now.”
For illustration purposes only. | Source: Midjourney
“Either find someone else or propose to him yourself!” her mother shouted just before Charlotte ended the call. The silence in the room was deafening.
Dropping the phone onto the bed, Charlotte buried her face in her hands. After a moment, she reached for her bag and pulled out the small velvet box.
She opened it slowly, revealing the delicate gold ring that carried generations of family history.
She held it in her palm, staring at it. The ring wasn’t just a piece of jewelry; it was a symbol of tradition, of responsibility.
For illustration purposes only. | Source: Midjourney
As the only daughter, that responsibility felt like a weight she wasn’t sure she could carry much longer.
The restaurant was warm and softly lit, with a hum of conversation and clinking glasses filling the air.
Charlotte sat across from Peter, her hands resting on the table, her mind racing with thoughts she couldn’t seem to silence.
“Time’s flown by, hasn’t it?” Peter said, leaning back in his chair with a relaxed smile. “I didn’t even notice. Tomorrow we’ll be back home, and this trip will just be a memory.”
For illustration purposes only. | Source: Midjourney
Charlotte forced a small smile.
“Yeah, it went by quickly… but it feels like something’s missing, like we forgot something important,” she replied, her voice tinged with sadness.
Peter furrowed his brow, leaning forward slightly. “What do you mean? What’s missing?”
She hesitated, her fingers fidgeting with the edge of her napkin. “Peter, don’t you think it’s time our relationship moved to the next level?”
For illustration purposes only. | Source: Midjourney
Peter chuckled, his tone light.
“The next level? Are you saying you want us to get a dog? Or maybe a cat?”
Charlotte gave a tight smile, shaking her head. “No. I mean something else…”
“I don’t follow,” Peter said, his playful demeanor giving way to confusion.
Taking a deep breath to steady her nerves, Charlotte reached into her bag and pulled out a small velvet box.
She placed it on the table between them, her heart pounding.
For illustration purposes only. | Source: Midjourney
“Peter,” she began, her voice trembling but firm, “we’ve been together for more than five years. I’ve known for a long time that I want to spend the rest of my life with you.”
With a deep breath, she opened the box, revealing the heirloom ring. “Peter, will you marry me?”
The color drained from Peter’s face as his eyes widened in shock. He looked at the ring, then at her, his discomfort evident.
Around them, the hum of conversation quieted as other diners took notice, their curious gazes making Peter shift uneasily.
For illustration purposes only. | Source: Midjourney
“You’re proposing to me?” he asked, his voice barely above a whisper.
“Yes,” Charlotte said, her smile faltering slightly. “What’s your answer?”
Peter glanced around, visibly unnerved by the attention. “I… I don’t know,” he stammered.
“This doesn’t feel right… I need time to think.”
Charlotte’s chest tightened. “Time? You’ve had over five years! I can’t keep waiting—I need an answer.”
The restaurant fell silent, all eyes on their table. Peter stood abruptly, grabbing his jacket.
For illustration purposes only. | Source: Midjourney
“I can’t do this. Charlotte, I think we need to take a break. I need to figure out what I really want.”
Charlotte’s breath caught. “A break? You’re breaking up with me?”
“No,” Peter said quickly, his voice defensive.
“Not breaking up. I just think we need some time apart. I’ll reach out when I’m ready.” Without another word, he turned and walked out.
“Peter!” Charlotte called after him, but he didn’t look back. Left alone at the table, Charlotte felt the weight of judgmental eyes around her.
For illustration purposes only. | Source: Midjourney
Fighting back tears, she hurriedly gathered her things, paid the bill, and left the restaurant, the sting of rejection lingering with every step back to the hotel. Next day she returned to her hometown and first person she went to meet was her mother.
Charlotte walked into her mother’s house, her suitcase dragging behind her, the wheels squeaking against the tile floor.
The house smelled of lavender, just as it always had, but instead of comfort, it made her chest tighten. Her throat felt dry, her thoughts a chaotic swirl of sadness and anger.
For illustration purposes only. | Source: Midjourney
As soon as her mother appeared in the doorway, Charlotte burst into tears and ran into her arms. The weight of her emotions spilled out in broken sobs.
“He left me, Mom,” Charlotte cried, her words muffled against her mother’s shoulder. “You were right. I wasted the best years of my life for nothing.”
Her mother gently stroked her hair, her voice surprisingly calm.
“It’s alright, sweetheart. I’m sorry if I pushed you too hard. But maybe this is a blessing in disguise. At least now he won’t waste any more of your time.”
For illustration purposes only. | Source: Midjourney
Charlotte pulled back slightly, her face tear-streaked and red. Her mother’s words stung at first, but the softness in her voice made Charlotte pause.
She hadn’t expected sympathy—she’d braced herself for an “I told you so.”
“Do you really think it’s for the best?” Charlotte asked, her voice trembling.
Her mother gave a small, sad smile. “I do. You deserve someone who knows what they want and isn’t afraid to fight for you. It’s time to think about what you want.”
For illustration purposes only. | Source: Midjourney
Hearing that, Charlotte let out another sob, this time feeling a weight begin to lift.
Years of pent-up anxiety, frustration, and heartbreak poured out, and for the first time, she let herself feel everything.
She stayed in her mother’s embrace, her tears slowing.
It wasn’t an instant cure, but in that moment, Charlotte realized something important: this chapter of her life had ended, and now, she had the chance to write a new one.
For illustration purposes only. | Source: Midjourney
Almost a month had passed since Charlotte’s trip. Though her heart still carried the weight of heartbreak, she had begun to heal.
Each day felt a little lighter, and the texts from Reggie, the man she met recently, were a welcome distraction. His thoughtful messages, sprinkled with humor and warmth, brought a smile to her face each morning.
They weren’t serious, but he was kind, and for now, that was enough.
That morning, as she scrolled through her phone with her coffee in hand, a different name appeared on her screen. Her breath caught.
For illustration purposes only. | Source: Midjourney
It was Peter.
“Hi, how are you? I’d like to meet and talk. Are you free today at five?”
Charlotte’s chest tightened. For weeks, she had convinced herself she was over him, but seeing his name brought back a flood of emotions.
Her hands trembled as she stared at the screen, her coffee growing cold. After a deep breath, she typed a simple reply:
For illustration purposes only. | Source: Midjourney
“Yes, we can meet.”
Later that evening, Charlotte sat at a corner table in a quiet café, her nerves on edge.
When Peter walked in, her stomach turned. He carried a bouquet of roses and approached with the same familiar, confident smile he had always worn.
“I’ve missed you, Charlotte,” he said, leaning in to kiss her cheek. She pulled back slightly, meeting his surprise with a cold stare.
For illustration purposes only. | Source: Midjourney
“I didn’t notice,” she replied, her tone clipped.
Peter hesitated but pressed on, sliding into the seat across from her. “Look, I know I acted like a jerk. I was scared.”
“Scared of what, Peter?” she asked, folding her arms.
“Of responsibility… marriage. And you blindsided me with that proposal. In front of everyone? Imagine how that felt for me.”
For illustration purposes only. | Source: Midjourney
Charlotte’s jaw tightened.
“How you felt? Did you ever stop to think about how I felt? Being in a relationship for over five years with no sign of commitment? How that made me question everything about us?”
“I didn’t realize it mattered so much to you,” Peter said, his voice softening.
“You should have realized,” she shot back.
“It mattered to me, and it should have mattered to you. But you walked away. You made your choice.”
For illustration purposes only. | Source: Midjourney
“I know,” Peter admitted, leaning forward.
“But I’ve had time to think. I was wrong, Charlotte. Let’s fix this. I’m ready now. Let’s go back to what we had. It was special, and I want to marry you.”
Charlotte shook her head, her resolve hardening.
“It’s too late, Peter.”
“Don’t say that,” he pleaded.
For illustration purposes only. | Source: Midjourney
“We love each other. We can make this work.”
“No, Peter,” she said, standing.
“There’s no ‘we’ anymore. What we had is in the past, and I don’t want to go back.”
As she walked out of the café, Charlotte felt a weight lift.
For the first time in years, she felt free—free to embrace her future, one where her happiness didn’t depend on someone who couldn’t see her worth.
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