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!
While I was on vacation, my wealthy neighbor constructed a fence on my property, obstructing my windows — I delivered a flawless lesson in return
After a week of sun and sand, Catherine was shocked to discover her new neighbor Jeffrey had built an imposing fence on her property. As a single mom, she couldn’t let this slide. What did she do to teach him a lesson he’d never forget?
Life as a single mom isn’t easy, but I’ve been making it work. I’m Catherine, 40 years old, and I’ve been raising my two boys, Liam (10) and Chris (8), all by myself for the past year.
Their father and I parted ways when I caught him cheating with another woman. Well, that’s a story for another time.
About two months ago, I bought a new house and moved in with my kids. It’s in a peaceful neighborhood with a beautiful forest nearby.
Everything about our new neighborhood seemed perfect until I met my next-door neighbor, Jeffrey. We had been at odds since the beginning.
I’ll never forget our first interaction.
It had been a day since we moved in when I heard a knock at my door. I opened it and saw him standing at my doorstep with a folder in his hand.
“Hello there, neighbor!” he said, extending his hand. “I’m Jeffrey. Welcome to the neighborhood!”
I shook his hand.
How nice! I thought. If only I knew what was coming in the days ahead.
“I wanted to discuss something important with you,” he continued, opening his folder.
“The previous owners signed this contract allowing me to build a fence on the property line.”
I raised an eyebrow. “Okay…?”
“So, I’ll be starting construction next week,” he said matter-of-factly.
I was stunned. “Excuse me? You’re not even asking for my permission?”
“Well, I have the contract right here—”
“That contract was with the previous owners,” I interrupted. “I’m the owner now, and I don’t want a fence blocking my view and sunlight.”
That’s when his face turned red.
“But I need this fence for privacy!” he yelled. “I’ve been planning this for months!”
“Why should I care about what the FORMER owner said?” I asked, but I never got a straight answer.
I just saw Jeffrey stomp out of my house.
Since that day, he’s been arguing with me almost every week about this fence. Apparently, he wants to host fancy garden parties without his guests seeing into my yard.
Well, excuse me for existing!
I couldn’t let him build that fence. I didn’t buy this house to stare at wooden planks instead of the beautiful sky and trees.
Little did I know, things were about to get much worse.
A few weeks ago, I decided to take my boys on a much-needed vacation. Liam and Chris were bouncing off the walls with excitement.
“Mom, can we go to the beach?” Liam asked.
Chris chimed in, “Yeah! And can we build a huge sandcastle?”
“Of course, boys!” I said as I hugged them. “We’ll do all that and more!”
We left for a week, looking forward to sun, sand, and relaxation. If only I’d known what was waiting for us when we got back.
As we pulled into our driveway, I noticed something odd. My heart sank as I realized what had happened.
“Boys, stay in the car for a minute,” I said as I got out.
My blood boiled with each step I took toward our house.
As I peeked to the right, I realized what had happened. There, right in front of our windows, stood a tall wooden fence. On our property. One foot from my windows!
“What the hell?!” I shouted, not caring who heard me.
Liam and Chris came running up behind me.
“Mom, what’s wrong?” Chris asked in a worried voice.
I took a deep breath. I had to stay calm for their sake. “Nothing, sweetie. Just a little… surprise from our neighbor.”
“But Mom,” Liam said, frowning, “we can’t see the trees anymore.”
My heart broke.
Jeffrey’s stupid fence had replaced the beautiful view from our windows that my boys loved so much. Now, we couldn’t even see the sky!
I couldn’t let this slide. I had to teach Jeffrey a lesson.
I had two options. Either take the legal route and wait for the authorities to take action or take matters into my own hands.
I chose the second one because my boys and I didn’t have enough time to take the legal route.
Later that night, I went to the pet store. I had a plan that I knew would work.
“Can I help you find anything?” the clerk asked.
I smiled sweetly. “Yes, I’m looking for an animal attractant spray. The strongest you have.”
After returning home, I waited until the neighborhood was asleep. Then, I went up to his precious fence and poured an entire bottle of the attractant liquid.
The pheromone scent was strong. It was designed to attract dogs for training purposes. But I had a feeling it might attract more than just dogs.
I did this for several nights in a row, ensuring the solution covered every inch of the fence.
Then, I waited.
It didn’t take long for results to show.
One night, as I was taking out the trash, I saw a stray dog lift its leg against the fence. I had to stifle a laugh.
“Good boy,” I whispered.
Over the next few days, more and more animals started visiting the fence. Foxes, raccoons, even a moose once! They all seemed to think Jeffrey’s fence was the perfect place to do their business.
I watched from my window as Jeffrey discovered the mess one morning. His face turned an impressive shade of purple as he realized what was happening.
But to my surprise, he didn’t take down the fence.
He started cleaning it.
Every morning, Jeffrey would come out with a bucket and scrub brush, muttering under his breath as he cleaned off the nightly deposits.
But no matter how much he cleaned, he couldn’t get rid of the pheromone scent. The animals kept coming back, night after night.
Soon, the smell became unbearable. Even my boys started to notice.
“Mom,” Chris said one day, holding his nose, “it stinks outside!”
Liam nodded in agreement. “Yeah, can we play inside today?”
“I know it smells bad, boys,” I said. “Just give it a few more days, okay?”
They nodded, but I could see they were disappointed. I hoped my plan would work soon.
The next day, I was coming back from a grocery run when I saw one of our other neighbors, Mrs. Thompson, knocking on Jeffrey’s door.
I slowed down, pretending to check my mail as I eavesdropped.
“Jeffrey,” Mrs. Thompson began, “what on earth is that smell coming from your yard? It’s awful!”
Jeffrey seemed so embarrassed.
“I… I’m working on it, Mrs. Thompson. There’s been a bit of an animal problem.”
“Well, work faster!” she snapped. “It’s affecting the whole neighborhood!”
As Mrs. Thompson stormed off, Jeffrey caught my eye. He had this apologetic look on his face that I had never seen before. I smiled at him and quickly walked into my house.
That evening, I watched from my other window as Jeffrey attacked the fence with every cleaning product known to man.
He scrubbed and sprayed for hours, but the smell lingered. Finally, he threw down his brush in defeat and trudged back to his house.
The next morning, I was awakened by a loud noise outside. I peeked through my curtains and had to blink a few times to make sure I wasn’t dreaming.
I could see Jeffrey overseeing a team of workers as they took down the fence.
I couldn’t believe my plan had actually worked!
I woke up the boys with the good news. “Liam! Chris! Come look outside!”
They raced to the window, their eyes widening as they saw the fence coming down.
“Mom, we can see the trees again!” Chris exclaimed.
Liam hugged me tight. “You’re the best, Mom!”
And with that, our view was restored, and Jeffrey had learned his lesson. However, the story doesn’t end there.
Later that day, Jeffrey approached me while I was gardening in the front yard.
“Catherine,” he started, clearing his throat, “I, uh… I want to apologize.”
“Oh?” I pretended to act surprised.
He nodded. “I shouldn’t have put up that fence without your permission. It was wrong of me.”
“Yes, it was,” I agreed, crossing my arms.
“I’ve learned my lesson,” he continued. “From now on, I’ll respect your property and your rights as a neighbor.”
“Apology accepted, Jeffrey,” I smiled. “Let’s start over, shall we?”
“I’d like that.”
As Jeffrey walked away, I couldn’t help but feel proud. I had stood up for myself and my boys, and in the end, everything worked out.
That incident taught me that life sometimes puts you in situations where you have to get creative to find a solution, just like I had to come up with a plan to teach Jeffrey a lesson he’ll never forget.
Do you think I did the right thing?
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