First-Time Homebuyer Process: A Step-by-Step Guide

Buying your first home is exciting, but it can also feel like there are a lot of moving pieces. Between getting pre-approved, finding a home, making an offer, completing inspections, and getting through closing, it is normal to have questions about what happens next.

Understanding the first-time homebuyer process before you begin can make buying your first home feel much more manageable.Here is a step-by-step look at what to expect from your first conversation with a lender all the way through getting the keys to your new home.

Step 1: Talk With a Mortgage Lender

One of the best places to start is by talking with a mortgage lender before you begin seriously looking at homes.

Your lender can help you understand:

• How much you may be able to qualify for
• What monthly payment range may fit your budget
• How much money you may need for a down payment
• Estimated closing costs
• Which mortgage programs may be available to you
• Whether you may qualify for down payment assistance

You do not need to have everything figured out before reaching out.

In fact, starting the conversation early can give you more time to prepare and help you understand what steps you may need to take before you are ready to buy.

Step 2: Get Pre-Approved

The next step is getting pre-approved for your mortgage.

During the pre-approval process, your lender will typically review information about your:

• Income
• Employment
• Credit
• Monthly debts
• Assets
• Available funds for your purchase

Once your information has been reviewed, your lender can give you a better idea of the home price and loan amount you may qualify for.

A pre-approval can also help you estimate what your monthly housing payment may look like.

That payment may include:

• Principal and interest
• Property taxes
• Homeowners insurance
• Mortgage insurance, if applicable
• Homeowners association dues, if applicable

Getting pre-approved does not mean you need to spend the maximum amount you qualify for. It is important to choose a payment that feels comfortable within your overall budget.

The Consumer Financial Protection Bureau also recommends getting preapproved before seriously shopping for a home so you understand your financing options and are prepared when you find the right property.

Step 3: Review Your Loan Options

Not every homebuyer needs the same type of mortgage.

Depending on your qualifications, the property you are purchasing, and your goals, you may have several financing options available.

Common loan programs include:

• Conventional loans
• FHA loans
• VA loans
• USDA loans

There may also be down payment assistance programs or other financing options available depending on where you are purchasing and your individual situation.

Some buyers may qualify for programs with low down payment requirements, while eligible VA and USDA borrowers may have options that do not require a down payment.

Your lender can compare the programs available to you and explain the differences in down payment, mortgage insurance, monthly payment, and qualification requirements.

Step 4: Set Your Homebuying Budget

Once you know what financing options are available, it is time to decide how much you actually want to spend.

Your pre-approval gives you a price range, but your personal budget should also take into account your other monthly expenses and financial goals.

Consider expenses such as:

• Utilities
• Home maintenance
• Repairs
• Transportation
• Childcare
• Savings
• Other monthly obligations

You may also want to leave room in your savings after closing for moving expenses, furniture, repairs, or unexpected costs.

You can use our Mortgage Calculator to see how different home prices, down payments, and loan amounts may affect your estimated monthly payment.

Step 5: Start Your Home Search

Once you are pre-approved and know your budget, you can start looking for homes.

A real estate agent can help you search for properties, schedule showings, understand the local market, and prepare an offer when you find the right home.

Before you begin touring homes, it can help to make a list of your priorities.

Consider things such as:

• Location
• Number of bedrooms
• Number of bathrooms
• Garage space
• Yard size
• Commute
• School district
• Home style
• Accessibility
• Updates or renovation needs

Separate your list into must-haves and nice-to-haves. This can make it easier to compare homes and stay focused on what matters most to you.

Step 6: Make an Offer

When you find a home you want to purchase, your real estate agent will help you prepare an offer.

An offer may include:

• Purchase price
• Earnest money
• Financing terms
• Closing date
• Inspection terms
• Seller credits or concessions
• Other contingencies

The seller can accept your offer, reject it, or make a counteroffer.

Once both parties agree to the terms and sign the purchase agreement, you are officially under contract.

This is also when your lender will begin working toward final mortgage approval for that specific property.

Step 7: Complete the Home Inspection

After your offer is accepted, you may choose to have the home professionally inspected.

A home inspection is designed to help you better understand the condition of the property.

The inspector may review areas such as:

• Roof
• Foundation
• Electrical systems
• Plumbing
• Heating and cooling systems
• Windows and doors
• Appliances
• Other visible components of the home

Depending on the inspection results and the terms of your purchase agreement, you may have options to address certain concerns with the seller.

Your real estate agent can help you understand what options are available.

You can also review the CFPB’s home inspection guidance to learn more about what an inspection covers and how it differs from an appraisal.

Step 8: Your Mortgage Goes Through Processing and Underwriting

While you are working through the inspection and other purchase details, your lender will continue processing your mortgage.

You may be asked to provide updated documents such as:

• Paystubs
• Bank statements
• Employment information
• Documentation for large deposits
• Homeowners insurance information
• Other documents related to your loan

Additional documentation requests are a normal part of the mortgage process.

The underwriter reviews your financial information, the property, and the loan to make sure everything meets the requirements of the mortgage program.

Step 9: Complete the Appraisal

For most financed home purchases, the lender will order an appraisal.

The appraisal provides an independent opinion of the property’s value and helps determine whether the home supports the amount being financed.

An appraisal is different from a home inspection.

A home inspection focuses primarily on the condition of the home.

An appraisal focuses primarily on the property’s value for the lending transaction.

Depending on the appraisal results and your loan program, additional steps may sometimes be needed before the loan can move forward.

Step 10: Prepare for Closing

As your closing date gets closer, your lender and real estate agent will help you prepare for the final steps.

You may need to:

• Finalize homeowners insurance
• Provide any remaining documents
• Review your final loan information
• Confirm your cash needed for closing
• Complete a final walkthrough of the home
• Review your Closing Disclosure

Your Closing Disclosure provides important information about your final loan terms and closing costs.

Take time to review it and ask questions if there is anything you do not understand.

Step 11: Closing Day

Closing day is when the final documents are signed and the home purchase is completed.

You will review and sign documents related to your mortgage and the transfer of the property.

Your exact closing process may vary depending on where you are purchasing and how the transaction is handled.

Once everything is signed, completed, and the transaction is finalized, you become the owner of your new home.

And then comes the part you have been waiting for: getting the keys.

How Long Does the First-Time Homebuyer Process Take?

How long the first-time homebuyer process takes depends on how quickly you find a home, your financing, the appraisal, inspection, and the agreed-upon closing date.

Some buyers find the right home quickly, while others may spend several months searching.

Getting pre-approved early can help you be better prepared when the right home comes along and may make the financing process smoother once you are under contract.

Do First-Time Homebuyers Need 20% Down?

No.

One of the most common misconceptions about buying a home is that you need a 20% down payment.

Some qualified buyers may have conventional loan options with down payments as low as 3%. FHA loans may allow qualified buyers to put 3.5% down. Eligible VA and USDA borrowers may have no-down-payment options.

Down payment assistance may also be available to some buyers.

Your options depend on your qualifications, loan program, property, and location, so it is worth reviewing your individual situation with a lender before deciding how much you need to save.