The 10 Steps to Buying Your First Home: A Process Overview

The 2024 First-Time Home Buyer Handbook

We challenged our writers to (A) explain the most important steps a person should take when buying their first home and (B) offer tips to help them succeed at each step.

This article is the result. We hope you find it helpful. And if you do, be sure to download our first-time home buying handbook for even more expert insights.

The First-Time Home Buying Process in 10 Steps

This process review assumes that you'll be using a mortgage loan to buy your first home, and that you plan to work with a real estate agent. Most first-time home buyers check both of those boxes, so we've included them in the steps below.

We've presented these steps in a logical order, to reflect the usual sequence of events that take place when a person buys their first home. But feel free to skip around as needed.

Shortcuts to the 10 steps covered in this guide:

  1. Establish a budget and start saving
  2. Check your credit reports and scores
  3. Choose the right type of mortgage loan
  4. Get pre-approved for a home loan
  5. Find a real estate agent to work with
  6. Start shopping for a home to purchase
  7. Make an offer to the seller
  8. Have the home inspected if desired
  9. Finish the mortgage underwriting process
  10. Attend closing and get the keys

Step 1. Establish a Budget and Start Saving

You'll want to have a basic housing budget in mind, before you even start talking to mortgage lenders. Specifically, you want to know the maximum amount you're comfortable spending on your monthly housing costs.

Basic subtraction is the easiest way to establish a housing budget.

To begin, you would subtract all of your non-housing recurring debts from your net monthly income (or take-home pay). Next, you would subtract an additional amount that represents savings contribution and lifestyle expenses.

The final number left over represents the maximum amount you could put toward your monthly housing costs. And you might even want to shave that down a bit more, in case of emergencies.

A simplified example of budgeting for a home purchase:

  • Net Income after taxes: $5,000
  • Non-housing expenses (groceries, utilities, credit card, car payment, etc.): $2,000
  • Desired monthly lifestyle and savings contributions: $1,000
  • $5,000 income – $2,000 expenses – $1,000 buffer = $2,000

Here, the home buyer could comfortably afford a maximum monthly housing cost of $2,000, including the mortgage payment, property taxes, and homeowner's insurance.

Saving money is another important step when buying your first home, and it's best to start saving early on in the process. Today is a good time to start.

When you get pre-approved for a mortgage loan (step #4 below), the lender will check to see if you have enough money in the bank to cover your down payment and closing costs. If you don't, they might not be able to approve you for a loan.

Step 2. Check Your Credit Reports & Scores

Many first-time home buyers apply for mortgage loans without knowing their credit score or credit history. After all, you're not  required  to complete this step when buying your first home. But it's still worth doing.

Your credit score is a three-digit number that shows how you have borrowed and repaid money in the past. It's calculated based on the information compiled within your credit reports.

  • People who pay their bills on time and in full typically have higher credit scores. Lenders like these borrowers because they're more responsible and less risky (statistically speaking).
  • People who have a pattern of missing payments on credit cards and loans usually have lower scores. Lenders are more wary of these borrowers because they bring more risk.

It's wise to review your credit reports before buying your first home. Make sure there aren't any errors or inaccuracies. If there are, dispute them ASAP using the instructions provided on the credit bureau's website (TransUnion, Equifax or Experian).

You should also check your FICO credit scores to see where you stand. The scoring range goes from 300 to 850, with higher being better.

First-time buyers typically need a score of at least 600 to qualify for a mortgage loan, but that's not set in stone. You might be able to qualify for a loan with a lower score.

Step 3. Choose the Best Type of Loan

You're established a budget. You've put money aside for your down payment and closing costs. And you've reviewed your credit reports and scores.

You're now ready for the next important step in the first-time home buying process—choosing a type of mortgage loan. At this stage in the home buying process, you have two main choices:

  • Do you want a fixed-rate or adjustable-rate mortgage loan?
  • Do you want to use a conventional or government-backed loan?

These are important choices, so let's examine them one at a time...

Fixed vs. Adjustable Mortgage Loans

A fixed-rate mortgage loan has the same interest rate for the entire life of the loan. An adjustable mortgage (ARM), on the other hand, has a rate that will adjust periodically with some predetermined frequency.

Most ARMs are actually "hybrid" loans that start with a fixed rate for the first one to seven years. After that initial phase, the rate will begin to adjust once per year. ARM loans typically offer a lower interest rate during those initial years, compared to a fixed-rate mortgage.

If you're planning to live in the home for a long time, you're probably better off using a fixed-rate mortgage loan. It offers the most predictability over the long term, with a rate that never changes.

If you think you'll only be in the home for a few years, an ARM loan (with a lower interest rate) could help you save money during those first few years.

Conventional vs. Government-Backed Loans

Choosing between a conventional or government-backed mortgage loan is another important step when buying your first home.

  • A conventional loan is a "regular" mortgage loan that does not receive any kind of government insurance, guarantee or backing.
  • A government-backed loan (like FHA and VA) gets insured by a government agency. This insurance is what distinguishes government-backed loans from conventional.

Conventional loans are the most popular option for both first-time and repeat home buyers alike. FHA loans are another popular choice, especially for borrowers who can't afford a large down payment and/or have credit issues in the past.

VA loans, on the other hand, allow military members and veterans to purchase a home with no down payment and no mortgage insurance, which is a major benefit.

Of all the steps to buying your first home, this is arguably the most impactful. Research is the key to success. Learn all you can about the different loan options described above, especially their pros and cons. This will help you determine the best option for your situation.

Step 4. Get Pre-Approved by a Mortgage Lender

Mortgage pre-approval is the next logical step in the first-time home buying process, and it makes sense to get this done before you start shopping for a home.

Pre-approval is when you work with a lender to determine two things:

  1. Whether or not you're qualified for a mortgage loan
  2. How much money the lender is willing to lend you

These are two important pieces of information for someone who is buying their first home. So the sooner you can obtain them, the better. Once you know how much you can borrow, you can start shopping for homes that fall into that range.

Notice the sequence of steps occurring here. When buying your first home, it doesn't make sense to start house hunting before you've been pre-approved. And you should only talk to a lender after you've established your housing budget.

So the pre-approval falls right in the middle. It happens after you've done your financial self-assessment, but before you start shopping for a house.

Step 5. Find a Real Estate Agent

This is an optional step when buying your first home. There's no law that requires you to use a real estate agent. You could purchase your first home all on your own, if you're confident in your abilities.

But working with an agent offers numerous advantages for buyers. Your agent will help you find homes that meet your needs, understand local market conditions, evaluate the seller's asking price, prepare and submit your offer, and more.

So, in a typical real estate transaction, the seller usually pays for both the listing and buyer's agent commissions. So there's really no reason for you to fly solo.

This step is listed in the middle of the first-time buying process for a reason. You don't need an agent during steps 1 - 4 above. You can handle those things on your own. But once you're ready to start shopping for a home, you can benefit from professional guidance.

The best way to find a local agent is through a trusted source, like a friend, family member, or coworker. Leverage your personal network. Let everyone know you're buying your first home, and ask for agent recommendations. Chances are, someone will deliver.

Step 6. Start Shopping for a Home

For most people, this is the most exciting step in the first-time home buying process. This is when you start looking for the place where you'll live for the next few years, or longer.

There are several ways to shop for your first home. We recommend using several of these strategies—or even all of them—rather than relying on just one.

Multiple Listing Service (MLS): This is a nationwide database of properties for sale. All real estate agents have access to the MLS. It's a basic service they provide to their clients. Your agent can use the MLS to create a list of homes that meet your criteria (location, size, price, etc.)., Trulia and Zillow: There are dozens of property-search websites online these days, with new ones popping up all the time. But you might want to start with the big ones. Some listing agents prefer one website over another, while other agents will list their properties on all of them. So you'll get the most coverage by searching all three of these sites.

RealtyTrac for Foreclosure Listings: Foreclosed homes (which are typically owned by banks, lenders or government agencies) are often priced below their true market value, in order to sell quickly. If you'd like to include foreclosed properties within your housing search, check out They offer one of the biggest databases of foreclosure homes, pre-foreclosures, auction properties, and bank-owned homes.

Yard Signs:  Believe it or not, some sellers don't use the Internet at all when listing their homes. And there's always a chance you'll overlook a property or two during your web-based search. For both of these reasons, it's wise to drive through your target neighborhoods occasionally, keeping an eye out for yard signs.

Step 7. Make an Offer to Buy the Home

For many first-time buyers, the offer can be one of the most anxiety-inducing steps in the home buying process. During this step, you'll tell the seller how much you are willing to pay for the home, and then sit back to await their response.

  • Make a reasonable offer, and the seller will be more likely to accept it.
  • Make an offer that's too low, and you could lose out to another buyer.

So, how do you decide how much to offer when buying your first home?

For starters, you'll want to look at comparable sales or "comps." These are similar types of properties that have sold recently in the same area where the desired home is located.

Similar, recent, nearby: those are the most important qualities for a comp.

Comparable sales data can help you determine the current market value of a home you're considering. This is important, because the seller's asking price might be realistic or ridiculous. You won't know until you review the comps.

Step 8. Get a Home Inspection

Let's assume that you make an offer on a house, and the seller accepts it. You now have a signed purchase agreement that you can provide to your mortgage lender.

So what's the next step in the buying process?

If you're using a mortgage loan to buy your first home, you'll probably have to go through a home appraisal process. Nearly all mortgage lenders require an appraisal to estimate the market value of the property being purchased, prior to approving the loan.

And you might choose to have a home inspection as well, though it's optional.

Some first-time buyers confuse these two procedures or think they're one and the same. But they actually serve two very different purposes, as explained in the table below.

Feature Home InspectionHome Appraisal
DefinitionA detailed examination of a home's condition by a qualified inspector.An unbiased estimate of a home's fair market value by a licensed appraiser.
PurposeIdentifies potential problems with the home's structure, systems, and components.Helps determine how much money a lender is willing to loan for the property.
Required or OptionalGenerally optional, but highly recommended for homebuyers.Required by lenders when financing a home purchase.
When It OccursUsually after the buyer has a signed contract to purchase the home.Typically ordered by the lender after the buyer's offer is accepted.
BenefitsHelps you understand the home's condition and potential repair. Might help you negotiate with the seller.Ensures you're not borrowing more than the home's worth. May impact your down payment requirements.

The takeaway: Home inspections evaluate the condition of the property and are entirely optional. Home appraisals estimate the market value and are usually required when a home buyer uses a mortgage loan.

Of all the steps you'll go through when buying your first home, the inspection process will contribute the most to your peace of mind. It helps you understand the true condition of the property, and any potential repairs you might face down the road.

Step 9. Go Through Mortgage Underwriting

Hang in there, you're almost done! There's just one major step left in the home buying process, before you reach the final closing. Next up is mortgage underwriting.

The underwriting process is a key step along the path to mortgage loan approval. It's a time when first-time buyers hold their breath, cross their fingers, and hope they don't receive any bad news.

Once you make it through underwriting, it's basically downhill from there.

Mortgage underwriting is a process in which lenders measure the risk of loaning money to a certain borrower, and to determine if that risk is acceptable. It also ensures that the borrower meets all requirements for the particular loan being offered.

Underwriting takes place after the loan application and supporting documents have been submitted, and before the final closing day. It involves an in-depth review of the loan file, the borrower, the property, and all supporting documents.

First-time home buyers often receive requests for additional information during the underwriting process (like an explanation for a bank withdrawal). If this happens, don't panic. It's a common occurrence and doesn't necessarily mean you're going to be rejected.

Stay in touch with your loan officer or broker during this process. Make sure the underwriter has everything they need. And if you do get a list of conditions that must be resolved, act immediately. Otherwise, you might end up delaying your own closing.

Step 10. Closing the Deal and Getting Your Keys

Closing represents the final step when buying your first home. It's the finish line to what is often a long and taxing process.

The closing process involves a lot of paperwork and the final distribution of funds. The seller gets paid. The real estate agents receive their commissions. The lender fees will be paid. And you walk away with the keys to your new house.

First-time buyers also have to pay closing costs, in most cases. These costs include all of the fees and charges that accumulate during the home buying and mortgage process. Average closing costs for home buyers typically range from 3% to 6% of the loan amount.

  • Your lender should give you a written estimate of these costs in advance, when you first apply for a loan. They use a standardized form known as the Loan Estimate.
  • A few days before your closing date, you should receive a finalized list of your closing costs. This is known as the "Closing Disclosure."

Depending on what state you live in, your closing might be managed by an escrow company or a real estate attorney. These individuals serve as a neutral third party, managing the transfer of funds and the signing of finalized documents.

In the days leading up to your closing, you might want to contact the person who is managing the process, to make sure they have everything they need from you.

Disclaimer: The home buying process can vary from one person to the next, due to a number of factors. As a result, portions of this article might not apply to your particular situation. This article is intended for a general audience and does not constitute financial or real estate advice.