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 Son’s Response to a Customer Screaming at His Favorite Cashier Brought Everyone in the Store to Tears
My Son’s Response to a Customer Screaming at His Favorite Cashier Brought Everyone in the Store to Tears
In a world filled with noise, chaos, and fleeting moments, there are some encounters that leave an indelible mark on our hearts. Picture this: a supermarket, a timid boy, and a cashier who became his unexpected hero. As tensions rise and voices clash, watch how one courageous act from a special young boy brings an entire store to a standstill.
William and his mom in the supermarket | Source: Midjourney
The supermarket doors slid open with a soft whoosh, and I could already feel William’s tiny hand tighten around mine. My son William is special in ways that break and heal my heart. He doesn’t talk much and is terrified of strangers.
The jarring sound of a busy store can send him spiraling into a meltdown, but today, like every other shopping trip, he was surprisingly calm.
The reason? Rachel.
William’s mother carrying him while shopping in a supermarket | Source: Midjourney
Rachel was a cashier, but to William, she was a beacon of light in the overwhelming storm of the supermarket. The first time we met her, she greeted us with the warmest smile. William, who usually hid behind my legs, had peeked out and given her a shy wave.
That was all it took. Since then, Rachel has become his favorite part of our shopping trips. He would insist on handing her the money and even help her pack our bags with diligence that melted the hardest of hearts.
Rachel greeting William | Source: Midjourney
“Mom,” William said, tugging at my hand as we navigated through the aisles. “Do you think Rachel is working today?”
“I hope so, sweetheart,” I replied, smiling down at him. “I’m sure she’ll be happy to see you.”
He grinned, his eyes lighting up. “I like Rachel. She always talks to me and lets me help.”
“Yes, she’s very kind,” I agreed, my heart warming at his enthusiasm.
“Can I give her the money today?” William asked, his voice filled with hopeful excitement.
William holding money | Source: Midjourney
“Of course, you can,” I assured him. “You’re getting really good at it.”
As we approached the checkout area, William started scanning the lines for Rachel. His eyes brightened when he spotted her familiar curly red hair and kind eyes. “There she is, Mom! Let’s go to Rachel’s line!”
“Alright, let’s get in line,” I said, steering the cart towards Rachel’s register, even though it was the longest one. Waiting was never a problem when it came to Rachel. For William, it was worth every second.
William and his mom standing in a supermarket queue | Source: Midjourney
William bounced on his toes, barely able to contain his excitement. “Do you think she’ll remember me, Mom?”
“I’m sure she will,” I said, giving his hand a reassuring squeeze.
When it was finally our turn, Rachel greeted us with her usual warmth. “Hey there, William! How are you today?”
“Hi, Rachel!” William beamed, stepping forward. “I’m good. Can I give you the money today?”
“Absolutely, William,” Rachel said with a smile. “I’ve been looking forward to it.”
William handing money to Rachel | Source: Midjourney
As we chatted and packed our bags, I couldn’t help but feel a swell of gratitude. In this chaotic world, there were still kind souls like Rachel who made it a little brighter for kids like William.
“Mom, can we come back to see Rachel next time?” William asked as we left the store, clutching his small bag of snacks.
“Of course, sweetheart,” I replied, smiling down at him. “We”ll always come back to see Rachel.”
William and his mother leaving the supermarket | Source: Midjourney
One Saturday afternoon, after picking up our essential items in the supermarket, we were standing in the cash register line when I noticed an elderly man in front of us. His face was red with frustration, and his voice grew louder with each passing second.
“This is ridiculous!” he bellowed, slamming his fist on the counter. “I’ve been using this voucher for years! You can’t just change the rules like this!”
Elderly man shouting at Rachel | Source: Midjourney
Rachel, ever calm and composed, tried to soothe him. “I’m really sorry, sir, but the policy has changed. The voucher expired last month, and I’m not able to override the system.”
The man’s face contorted in anger. “Do you think I’m lying? This is theft! You’re stealing from me!”
Rachel’s voice remained gentle. “I understand your frustration, sir. Let me call the manager…”
“I don’t want a manager!” he shouted, cutting her off. “I want you to fix this now!”
Rachel trying to calm an angry customer | Source: Midjourney
I held William’s hand closer, feeling his grip tighten. I knew how scared he could get in unusual situations like this. His breathing quickened, and I could see the panic starting to set in.
“It’s okay, William. Just stay with me,” I whispered, hoping to soothe him.
“Mom, why is he so angry?” William asked, his voice trembling.
“Some people get upset over little things,” I explained softly. “But it’s not right to yell at others. Rachel is just doing her job.” William nodded, his eyes still fixed on the scene unfolding before us.
William and his mother having a conversation | Source: Midjourney
“William, let’s just wait it out,” I said, trying to distract him. “Rachel will be okay.”
But William seemed to have made up his mind. He let go of my hand, his face set with determination. “Mom, I have to help her.”
Before I could react, he rushed towards Rachel, his small frame standing between her and the annoyed customer.
“Stop yelling at her!” William’s voice was loud and clear, his eyes fierce. The entire line fell silent, everyone watching this unexpected turn of events.
Angry William standing up for Rachel | Source: Midjourney
The old man looked taken aback, his anger momentarily diffused by the sight of the brave little boy standing up for Rachel. “What’s this?” he muttered, bewildered.
“What’s your name, kid?” the old man asked, his tone softening slightly.
“William,” he replied, standing his ground. “And you shouldn’t yell at Rachel. She’s nice.”
Rachel looked down at William, her eyes wide with surprise and gratitude. “William, it’s okay,” she said softly, reaching out to touch his shoulder. “Thank you, but I’ve got this.”
Rachel and William having a heartwarming moment | Source: Midjourney
William shook his head. “No, he shouldn’t yell at you.”
The old man sighed, his shoulders slumping. “Fine, keep your discount,” he grumbled, turning away and walking out of the store.
The whole line seemed to exhale collectively as I rushed to William, wrapping my arms around him. “Are you okay, buddy?” I asked, my voice shaking.
William nodded, his expression still serious. “I didn’t want him to hurt Rachel.”
William and his mom hugging | Source: Midjourney
Rachel crouched down to William’s level, her eyes soft. “Thank you, William. You’re my hero today.” She handed him a small piece of candy from behind the counter. “For being so brave.”
William took the candy, a shy smile creeping onto his face. “Thanks, Rachel.”
At that moment, a ripple of applause spread through the line. People smiled and whispered to each other, moved by William’s bravery.
Crowd in a supermarket cheering | Source: Midjourney
A woman behind us stepped forward and ruffled William’s hair. “You did a good thing, young man. You stood up for what’s right.”
An older gentleman gave William a thumbs-up. “Way to go, kid! We need more people like you.”
Strangers smiled at William and tried to buy him more candy, but he got shy all over again as if nothing had happened. The bits of adrenaline were gone, and he seemed very tired all of a sudden.
William’s mother carrying him | Source: Midjourney
As we walked to the car, William clung to my hand, his energy waning. “Mom, did I do okay?” he asked, looking up at me with wide eyes.
I knelt down to his level and hugged him tightly. “You did more than okay, sweetheart. You stood up for a friend, and that’s one of the bravest things anyone can do”
William’s mother hugging him in the parking lot | Source: Midjourney
As we drove home, I reflected on the day’s events. William had shown me that even in the face of fear, kindness, and courage shone through.
It was a powerful reminder that sometimes, the smallest voices can make the biggest impact. And in a world that can often be harsh and unforgiving, it’s these moments of compassion that bring us all closer together.
William and his mother hugging | Source: Midjourney
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