Women & Money: Practical dreams offer best path to house you desire

If getting the house you long for requires the appearance of a fairy godmother, an inheritance from out of the blue, a winning lottery ticket, or stretching your finances to the point that the dream is destined to become a nightmare, then you need to reshape your dreams. What good are they if they have little chance of coming true or will lead you into a financial mess? The best dreams are the kind we can make a reality. And I'm here to tell you that you can make them happen - if you learn how to dream the right dream, the one that makes sense for you. What I call practical dreaming.

It wasn't so long ago (OK, it was more than 30 years ago) that I graduated from living in a van to renting an apartment. As great as that move was, I had bigger ambitions. I wanted to own a home. But at the time, I was earning barely enough to cover my rent and other basic living expenses. That's when my first practical dream came to me: I realized the only way I'd be able to get a place was if I partnered with someone else. So I bought a house with a friend and her mother. Well, to be accurate, all the money came from her mom - we just split the mortgage payments with her - but it was a start. And it worked.

A few years later, I focused on the next step in my incremental dreams: still owning with my friend, but minus her mom. With our share of the gain from the sale of the first place, we were able to make the move - the new house was a modest 1,000 square feet, but as far as I was concerned it was a palace. I was thrilled with what I could afford.

Jump ahead to today, and even though I'm wealthier, I'm still a practical dreamer. I don't need some fantasy mansion. I buy what I need, as opposed to what I can afford. That approach has never let me down, and I'm certain it can work for you.

Sure, it's fun to check out luscious magazine spreads, but don't base your housing dreams on someone else's. If what you can swing is a $1,500 monthly mortgage, there's no point in setting your sights - for now, anyway - on the $5 million Malibu beachfront property or the 10,000-square-foot Central Park penthouse.

Create a dream you can achieve, the next step that works for you. If you're renting a small studio, dream about a condo of your own. If your family has grown and your house hasn't, dream about a place with one more bedroom and a backyard big enough for the jungle gym your kids want.

Even the most clear-eyed dream takes money. And money is typically what keeps us from converting dreams to reality. If you really want to change your housing situation, you need to commit to saving, and that demands patience as well as discipline. Depending on your current financial situation and the scope of what you want, saving enough for a down payment may take a few years.

But remember: Your dream starts coming true the minute you commit to socking away money. Every month you put something aside, spending less in order to save more, puts you a month closer to the dream.

Most of us want more space than we have. We hit the listings in pursuit of our bigger and better place. I say slow down and take another look. How about dreaming of turning what you have into what you want - that is, renovating rather than moving? It can make great financial sense. Let's say you bought a house or refinanced a mortgage in the last few years (assuming you had a strong FICO score at the time), and you're paying about 5 percent on a fixed-rate mortgage.

Trading up now for a new home would push the interest rate on the loan to 6.5 percent. Add to that the commission to the broker who sells the old place and the closing costs on the new one, and you're talking serious outlay. And don't forget moving costs, or the fact that a more expensive house means higher property taxes and insurance. Not so dreamy after all, eh?

So before you make the open-house rounds, consider what you have. Do you really need a new house - or would the problem be solved by a beautifully redone bathroom or an extra bedroom for guests? Renovating rather than relocating can be the smarter financial move, with one caveat: Don't go too far beyond the neighborhood's basic level, upgrading to the point where you have a Taj Mahal bursting its boundaries on a block of ranch houses.

The rule still applies. Go for what you want, but don't go overboard. Find your practical dream.