How to Own Your Dream Home

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:

  1. Follow the Financial Basics
  2. Find Out How Much Equity You Have
  3. Set Your New Home-Buying Budget
  4. Find the Right Dream Home for You
  5. 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 5-Year-Old Daughter Told Me I’m Not Her Real Dad

Josh’s entire world is shaken when his young daughter unexpectedly reveals a family secret that challenges the very core of their existence. As undisclosed affairs come to the surface, a simple DNA test emerges as the crucial tool in untangling the intricate web of deception and rediscovering the true essence of family.

I’m still grappling with the situation, and honestly, I’m at a loss. My little daughter, Amy, only five years old, dropped a bombshell on me that has shattered my reality. She casually mentioned, “Daddy, you know you’re not my real dad, right?” Initially, I brushed it off, thinking she was confused or perhaps playing a game. Kids can have wild imaginations, after all. Or maybe she had picked up something unusual from TV. I laughed it off, attempting to gently correct her, but the seriousness in her eyes gave me pause.

The instant she said it, I was hit with a wave of shock, as if an icy cold wave crashed over me. Initially, I couldn’t believe it. How could my daughter, the little girl I’ve nurtured and cherished since her birth, utter such words? I tried to reassure myself that she must have misunderstood something she heard or saw.

However, as I looked into her innocent eyes, a sinking feeling took hold of me. The way she mentioned it so matter-of-factly, without grasping the gravity of her words, tore at my heart.

The shock swiftly turned into heartache. The idea that I might not be her biological father was incomprehensible. It felt like the ground was slipping from beneath me. My mind was flooded with questions and fears.

Had Jill, my wife, deceived me? Was there something from the past that I was oblivious to? The notion that my family might not be what I thought it was left me devastated.

“Then who is your real dad, sweetie?” I asked tenderly.

“Uncle Andrew,” she blurted out, before returning to her dolls, leaving me speechless.

I was bewildered. I adore Amy more than anything, and the prospect of a hidden truth like this has left me feeling betrayed and utterly shattered. My mind was swirling with questions. How do I even begin to address this situation? How do I approach Jill about it without causing further strain? I was afraid of what I might uncover, but I knew I had to unearth the truth for Amy’s sake and mine.

I resolved to discuss Amy’s unsettling words with Jill. I needed clarity, for both Amy’s well-being and mine. So, despite the storm of emotions raging within me, I approached Jill calmly. I relayed what Amy had said, observing Jill’s reaction closely. She chuckled it off, but her laughter seemed forced, almost nervous. In that moment, I sensed there was more to this than a child’s imagination run wild.

To delve deeper into the matter, I arranged a playdate not just for Amy but also for Kyle, Andrew’s child. I anticipated a typical day, yet I remained on high alert, monitoring their interactions, searching for any clues or indications. Jill’s uneasy laughter lingered in my mind, and I couldn’t shake the feeling that this innocent playdate might uncover more than mere child’s play. It was a plunge into the unknown, but I was determined to uncover the truth, whatever it may be.

As Amy and Kyle played, I observed Andrew closely. Something about his demeanor around Amy struck me as odd, too familiar, too intimate for an uncle. I remained vigilant, listening intently, and what I overheard shattered me completely.

In her innocent, childlike manner, Amy asked Andrew, “When will we tell Josh that you’re my real Daddy?”

“Soon, sweetheart. But until then, it’s our little secret.”

My heart skipped a beat. The pain of those words was unbearable. It felt as though the ground had collapsed beneath me. Anger, betrayal, and an overwhelming sadness engulfed me.

At that moment, I realized that this wasn’t merely a child’s misunderstanding or a fabricated tale. It was a hidden truth, concealed in plain sight, and it was tearing me apart. I maintained my composure outwardly, but internally, I was screaming. How long had this lie festered? How could Andrew participate in this charade right under my nose?

After the playdate, I was distraught, but I needed answers, I craved the truth. I confronted Jill once more, armed with what Amy and Andrew had disclosed. I demanded an explanation, no more brushing it off, no more justifications. The joviality of the playdate had devolved into a nightmare, but I was determined to confront it head-on, prepared for whatever revelations ensued.

The confrontation with Jill surpassed my expectations in intensity. As soon as I broached the subject of what Amy and Andrew had discussed, the tension was palpable. Jill’s usual composed demeanor crumbled, and she broke into tears, her facade crumbling under the weight of reality.

Amidst her sobs, she admitted to a brief affair with Andrew. She attempted to rationalize her actions by citing feelings of neglect and loneliness during a rough patch in our marriage.

According to her, my workaholic tendencies and emotional distance drove her into Andrew’s arms. She painted a picture of vulnerability and desperation, a moment of weakness where she sought comfort in the wrong place.

However, her tears and justifications fell on deaf ears. My heart was too consumed by betrayal and pain to entertain her explanations. The agony of her confession, coupled with the ongoing deceit surrounding Amy’s paternity, left no room for compassion. All I could think about was the deception that had permeated my household, the trust that had been irrevocably shattered.

I was adamant about my next course of action: a DNA test. It was the only means of piercing through the lies and uncertainties, of reintroducing truth into our lives. I informed Jill of my decision, emphasizing its non-negotiable nature.

The imperative need to ascertain whether Amy was indeed my biological daughter eclipsed all other considerations. That moment marked the commencement of the end of our marriage as we knew it, propelling us into a maelstrom of legal and emotional turmoil that would redefine our family’s future.

The wait for the DNA test results was agonizing. Each day felt interminable, a relentless stretch of time teeming with anxiety, hope, and dread. My mind was in constant turmoil, vacillating between the hope that Amy was mine and the terror of an alternative reality.

During those interminable moments, I found myself reminiscing about every shared memory, every shared laugh, and every tear with Amy. She was my precious daughter, the light of my life. The notion of her not being my biological child was unfathomable, a potential reality that threatened to upend everything I held dear.

When the results finally arrived, my hands trembled as I tore open the envelope. It felt as though the entire world held its breath, awaiting the outcome along with me. As I perused the document confirming that Amy was indeed my biological daughter, a surge of relief and jubilation washed over me. It was a moment of profound clarity and validation, severing the tangled web of lies and deceit.

The joy of knowing that Amy was mine was tempered by the anguish of betrayal and the imminent dissolution of our family as I knew it. Nevertheless, in that instant, the bond between Amy and me emerged as the one unequivocal truth amidst the chaos. This revelation fortified my determination to safeguard and cherish our relationship, irrespective of the legal and emotional battles that lay ahead.

Following the emotional upheaval of the DNA test and confronting the harsh truths within our marriage, I took the inevitable next step: serving Jill with divorce papers. The decision was not made lightly, but it became evident that our marriage was beyond salvage. The breach of trust was irreparable, and I needed to prioritize the well-being of Amy and myself.

The divorce proceedings were arduous, fraught with legal complexities and emotional turmoil. However, amidst the chaos, there was a silver lining: securing joint custody of Amy. It was imperative to me that despite everything, Amy would not lose access to either of her parents. She required stability and affection, particularly during such tumultuous times.

Throughout this ordeal, my primary objective was to shield Amy from the adult complexities and preserve her innocence. We endeavored to ensure that everything was as seamless as possible for her, ensuring that she felt loved and secure. Despite the pain and betrayal, I refused to let my relationship with Jill impede Amy’s bond with her mother. Children need love, not discord.

Now, with the divorce finalized and custody arrangements in place, I feel a sense of relief. The bond between Amy and me remains unscathed, reinforced by the trials we have endured. We are moving forward, just the two of us, reconstructing our lives with new routines and a deeper connection. The ordeal was agonizing, but it brought clarity and, ultimately, a fresh start for Amy and me. Our bond is unbreakable; we are navigating this new chapter together, with hope and resilience.

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