First-Time Home-Buyer’s Step-by-Step Guide

Table of Contents

A beautiful home and a white picket fence. Conventionally, this is the American dream, and for first-time home buyers, this is “the” dream. Home buying rarely begins when you have the money to buy that beautiful house. For most people, their first home has been on their minds for as long as they can remember.

How do you start moving in the right direction towards finally moving into a property under your name? Well, depending on your category, you could start with getting your mortgage pre-approved or house hunting for new listings in your preferred location.

Regardless of where you fall on the first-time home buyer spectrum, a few steps form the backbone of the home-buying blueprint. This might easily be the most expensive investment you will ever make (and not just financially-you may have to put in your blood, sweat, and tears, too), and it helps to have a good start.

Read on to familiarize yourself with the steps to buying a house for the first time and making that homeownership dream a reality.

Questions to Ask Yourself Before Kickstarting the Home Buying Process

If you could have your way, factors such as purchase price, geographic locations, and square footage would not limit your choice of home. However, first-time buyers quickly become overwhelmed by limitations and preferences when they join the property scene.

To avoid being stuck in a house at the pinnacle of your worst financial decisions, you must dot your Is and cross your Ts well before purchasing. Home is where the heart is, but the mind is what will take you there. Here are a few considerations to determine what type of home works for you.

What Type of Home are you Looking for?

If you still need to learn, there are numerous types of homes to choose from in the real estate market. First-time homebuyers may be attracted to stand-alone structures that offer a better environment for family living, but there are several other options, none of which deserves to be written off without proper consideration.

Different housing types, from condominiums, bungalows, and apartments, to multifamily residential, have varying pros and cons. Therefore, understanding what type of home you are looking for should be a key consideration. Sign up to get alerts of new property/house/condo/etc listings when they come on the market.

Critical Steps in Buying a House

Once the rubber meets the road, it’s time to begin home-buying. There will be several contracts to read, multiple documents to file, numerous legal implications to familiarize yourself with, and even more research. Still, you can rest assured that it’s all for a good cause.

Even better, you don’t have to bog yourself down with all the paperwork. A licensed real estate agent can take the load off your shoulders. Here are the steps to buying a house for the first time.

Step 1: Determine Your Budget

Financial health is arguably the most important consideration when buying a home. First-time buyers are often in the dark regarding knowing how much they can afford to spend, their loan limits, how their credit scores affect their mortgages, and many other financial implications.

How to Calculate Your Upper Limit

Determining your budget involves various steps. First of all, you need to assess your annual household income and weigh that against your annual expenses. When securing a mortgage for your loan, you are advised to take a loan that is at most three to five times your annual income.

Next, you need to outline your monthly expenditure. This includes your monthly payment for student loans, food and transport expenses, rent, and other miscellaneous expenses.

Once you identify your monthly budget, you can reference this with your monthly income to get a clear picture of how much you can contribute as monthly mortgage payments. It is crucial to avoid overwhelming yourself with monthly debt payments.

Your upper limit, therefore, will be stipulated by:

  • Your mortgage loan limit
  • Down payment limit
  • The amount of money you can comfortably contribute to the monthly debt.

It would help if you got pre-approved to get an accurate figure for your mortgage loan limit. This is discussed in detail later in this article.

Before making any bad decisions, you must fish out your W2 forms, credit history, credit cards, and bank statements. It’s time you met your lender. If you have taken the time to go over listings online, then you know that houses cost a small fortune. Luckily, you don’t need to have all the money with you upfront.

Multiple financing options are available to help you find a house that meets a specific price range. For most people, the ideal path to follow is in line with mortgages, but first, you must meet down payment requirements.

Perks Available to First-Time Homebuyers

Several parties are interested in helping you become a homeowner, including your bank and federal and state governments (believe it or not). Depending on your geographic location, you may be eligible for various types of first-time home buyer government programs:

FHA Mortgages

The federal housing authority provides FHA-backed mortgages that usually offer lower interest than a conventional loan. Depending on how much you have stored away as savings for the down payment, you may choose from various mortgage options. However, it is important to note that these mortgages depend on your credit score.

With the FHA-backed mortgage, you might be eligible for a down payment requirement of between 3%-5% as opposed to the 20% requirement. However, you should expect to pay the higher monthly payment in the form of premiums to the government. Doing proper research will help you make an informed decision.

To qualify for this type of mortgage, you have to meet the criteria stipulated by the housing department. If you bought a home with a spouse in the past and are now divorced or widowed, you may still benefit from the first-time home-buyers FHA-backed mortgage.

Tax exemptions

In addition to the mortgage options available, the federal government (and select state governments) offer tax exemptions to first-time homebuyers to try and cushion them through the home-buying process.

Tips to Stay Within Your Budget

With proper knowledge of how much you can comfortably contribute towards buying the new house and your capability to offset your mortgage loan through monthly payments, it becomes much easier to stay within budget. Whether or not you are trying to get an expensive house, you must stay within your budget to avoid being home-poor. Here are a few tips to help you in budget planning:

Give Yourself Some Wiggle Room

After securing a mortgage loan from your mortgage lender, ensuring you do not settle for a house on the upper end of your loan limit is a good idea. This is because there are numerous other costs that you might encounter while trying to close the deal on the house. This includes charges towards offsetting closing costs, an appraisal fee, and many more hidden costs.

As a bonus, this will give you the upper hand in competitive markets since you can drive up the price and edge out the competition (you don’t want to be caught flat-footed when it boils down to a bidding war).

Consider a Less Expensive Market

You might want the best for yourself, but sometimes the best decision is the one that grants you financial freedom. You may explore less expensive markets to try and stay within budget. You never know. You might find your hidden gem there.

Avoid Bidding Wars

Unless you are hell-bent on getting a specific home, avoiding bidding wars is always a good idea, which may translate to paying more for the basic property. You can do this by avoiding houses that fall within a hot market. If you are budget planning, then bidding wars should be lined with police tape.

Find a Trustworthy Local Real Estate Agent

Being the newest kid on the block (or at least trying to be) means you might need to be better acquainted with the cost of houses and other property taxes in the area.

However, with a helping hand from a real estate agent, you can protect yourself from being milked dry by enlisting the services of a real estate agent through comparative market analysis. This is an important note in the book of first-time home-buyer tips.

Know Your Upper Limit

The idea behind determining your budget is to identify your upper limit. This will help you shift your focus to more affordable homes for sale. Striking gold in the housing market would be finding a home that is within your budget and packs all your desired features. As usual, flexibility may be necessary.

Step 2: Get Pre-Approved for a Mortgage

As mentioned earlier, getting pre-approval for your mortgage loan is the best way to determine your purchasing power. Depending on your credit score, investment portfolio, and savings balance, getting pre-approval may be simple, straightforward, or confusing. Shopping for mortgage options is among the key steps when seeking mortgage approval.

So, what do you need when seeking pre-approval for your mortgage loan? Your mortgage loan officer will most likely need proof of funds. Proof of funds refers to tangible evidence that you can follow through on your debt payment with minimal probability of defaulting on your debt.

Choosing a Lender

The first step in getting pre-approval for a mortgage is identifying the different types of mortgages. The type of mortgage that works for you should meet your timeframe requirements without overexerting your purchasing capabilities. Consider the mortgage when identifying the mortgage type, as different banks and credit unions have different approaches to mortgages and rates and fees.

You might be tempted to settle for your current banking institution, but it is advisable to explore market trends with different banks before making the final decision. You may use several options to compare rates and fees of different banks simultaneously, such as LendingTree and Zillow.

Whether you explore a 30-year mortgage option, a 15-year fixed-rate mortgage, or settle for an adjustable-rate mortgage, the choice of your lender is pivotal. It would help if you also remembered to pay attention to the fine print (this includes the mortgage insurance and interest rate).

Research customer reviews on the type of mortgage you are interested in on different platforms. Where possible, prioritize referrals, as this gives you accurate first-hand information on what to expect.

Getting Proper Documentation

Have you been paying your credit card debts on time? Have you defaulted on your student loans, or is your payment erratic? All this comes under scrutiny when you need to provide the required documents to your mortgage lender. The documents provided will eventually provide a clear picture of your financial status.

Before setting out to visit your mortgage lender, you will need to have the following documents at hand:

  • Proof of income (this includes W2 forms, tax return forms, and pay receipts)
  • Bank statements (this will help the lender track your account balance, spending habits, and purchasing power)
  • Investment statements (your investments contribute to your financial portfolio and may be considered as a source of income)
  • Employment verification
  • Credit report
  • Proof of identity (driver’s license or passport)

Lenders will assess your debt-to-income ratio (the relationship between your monthly debt and monthly income) or your net household expense ratio, which may be supported by other documents, not on this list.

Check with your mortgage lender for an accurate assessment. To streamline getting your mortgage loan pre-approved, you should communicate openly with your loan officer and promptly provide the requested documentation.

Once your loan is approved, you are given a mortgage pre-approval letter valid for a few months. Presenting this pre-approval letter to home sellers will give your offer an attractive appeal increasing the probability of closing the deal.

However, it is important to know that making major financial decisions, such as buying a new car or making a major investment, may cause your loan to fall through at the last moment. A pre-approval, therefore, is not bulletproof.

Step 3: Choose a Real Estate Agent

Much of this article concerns mortgage payments and real estate agents. This is because real estate agents are an integral part of the home-buying process. Your choice of a real estate agent will play a critical role in the purchase price, location, and other home characteristics, as well as the ease of the whole process.

In theory, the real estate agent is your reference for everything in the market. So, if you don’t know about private mortgage insurance, don’t worry. Your real estate agent can help you with that.

A real estate agent helps you make home-buying more convenient by providing expertise and support. Their expertise will especially come in handy during negotiating. Their familiarity with the housing market in your preferred location will help you make the right decision on things such as the school district, neighborhood, and community amenities.

Real Estate Agents: The Advantages

There are many advantages to hiring a real estate agent. This is because they have a wealth of resources and knowledge to help you streamline the buying process.

Save Time in Carrying Out Your Due Diligence

Different contracts and legislations surround the home-buying process. You might spend ages trying to stay on top of the paperwork, only to find yourself faced with a new document on your lap that you can’t make heads or tails off, or you could leave it to the experts. A real estate agent will also help you narrow your search for a home that meets your needs.

Negotiation Skills

You may think you have good negotiation skills, but negotiating heavily depends on the knowledge of the tools you have at your disposal. In buying a home, your real estate agent is well placed to assess factors such as having a pre-approval letter when determining when to call the bluff or raise the stakes.

Additionally, you are less likely to have the home seller (or their seller’s agent) lowball you when negotiating with a real estate agent, as they know they are dealing with an expert.

Market Expertise

Regarding the ins and outs of the real estate market, it is highly unlikely that you will find someone more knowledgeable than a certified real estate agent. Whether finding out which neighborhood is better, what amenities should come with a house at a certain price, or even the best price for your dream home?

Contract and Paperwork

A real estate agent has enough background information and training to ensure that all the documents and contracts presented to them meet industry regulations and are legally binding. When sending offers, receiving acceptance letters, and going into contract, a real estate agent will be handy.

Using the Multiple Listing Service (MLS)

The multiple listing service, popularly abbreviated as MLS, refers to a network of house listings that span the entire country and include most houses available for sale. This tool is exclusive to real estate agents, but you can get in on the action by having a real estate agent lookup listings.

Tips to Help You Choose a Reliable Real Estate Agent

You know the advantages of having a licensed and reliable real estate agent, but how do you separate the grain from the chaff? When it comes to choosing a real estate agent. Considering factors such as experience, reputation, and credentials is important. You should ensure that the National Association of Realtors (NAR) certifies your preferred real estate agent.

Additionally, it would help if you looked out for eloquence and excellent communication skills, as this will help in the negotiation process and when you need to make inquiries regarding the progress of the processes involved. Your gut instincts also play a role in your choice of a real estate agent.

Step 4: Find Your Dream Home

It’s only natural that you find your dream home and make an offer. Being such a critical step, it goes without saying that most people would be eager to skip this part of the home-buying process.

So, how do you find your dream home? If you have been paying attention, you know it’s by doing your due diligence. Unless you’ve already picked out the perfect home for yourself, you will have to go through one or all of the following options:

Online Listings

Several websites will help you narrow your search for your dream house by filtering your search to match your desired locations, square footage, features, and many more. This tool is as simple as searching on your computer or mobile phone. Finding the right home means staying alert of any new listings that come to market. Be sure to search for properties online and set alerts for regions you are most interested in

Open Houses

Open houses are a great way of familiarizing yourself with a house and imagining the space as your own. You might not have the certificate of occupancy. Still, you can explore factors such as how lighting affects the furniture or how well your kitchen appliances will fit. As a bonus, you can interact with the owner and gain invaluable information on the state of the house and its history.

Real Estate Agents

Your real estate agent has more than enough houses. They are just dying to show you. The advantage of using a real estate agent to search for a new home is that they can accurately deduce which property would be best for you from your description of what you are looking for.

What to Look Out for in a Home

A house meeting your expectations might only sometimes mean it is your best choice. Several other additional conditions distinguish a good listing from a great one. These include:


Different locations have different advantages and disadvantages. You should conduct adequate research on the property’s location before making any financial decisions. Depending on the market conditions, price is almost always a good indicator of the nature of the location.


Do you have a large family? Or need space for a studio in your home? Different people have different requirements when it comes to the size of their homes. Therefore, you should consider the size of the home and whether it meets your long-term and short-term needs.


It is pivotal that you consider the condition of the property. Some features can always be upgraded or renovated when you move in, but some are deal breakers. You should pay close attention to the HVAC system, the roof, foundation and assess for water damage. A home inspection is the best way to assess the condition of a listing.

Poor conditions sometimes work in your favor as this gives you the leverage to negotiate for a lower price for the property.

Other considerations include the following:

  • Resale value
  • Features and amenities
  • The layout of the house

Step 5: Make an Offer and Close the deal

When making an offer, your real estate agent becomes your best friend. You will work hand in hand with your real estate agent to draft the different documents, including a letter of offer that meets your budgetary requirements and contingencies that must be fulfilled before closing the deal. After this, the documents will be sent to the real estate agent of the home seller for review. Should they accept, you can proceed to close the deal.

However, if they reject the offer, or give a counteroffer, you and the real estate agent will take the time to revise your initial letter of offer and send out a new and updated offer. During this back-and-forth stage, it is also necessary that you keep an eye open for other options, as negotiations might fall through at the last minute. Once both parties reach a mutually acceptable agreement, you can now close the deal.

A real estate attorney should be involved in this stage to review the different contracts and identify possible liabilities, loopholes, or legal issues. This will also help ensure the process meets state and federal regulations.

What to Expect in the Closing Process

You will be invited to conduct a final walkthrough during the closing process. This will allow you to evaluate whether requested repairs have been made and other contingencies (like the inspection contingency) met. You will also be requested to review the settlement statement that includes all the closing costs you are expected to facilitate. It would help if you ensured that the contract’s contents are accurate.

You must bring several documents, including an ID and proof of insurance. The most crucial step in the process lies in signing the document. These documents include the following:

  • Mortgage agreement
  • Title transfer
  • Closing Disclosure
  • Closing affidavit
  • Promissory note
  • Power of attorney (if you will not be available for the closing personally)

It would be best if you took your time to read these documents in detail before signing them. It is common practice to allocate several hours for this phase. After signing the necessary documentation, you will be given the keys to the property and officially become the new homeowner (a worthy upgrade from a home buyer).

Key Takeaways

There are several steps to buying a house for the first time. As a first-time homebuyer, you should ensure that you adhere to all of them in the following order:

  1. Determine your budget
  2. Get pre-approved for a mortgage
  3. Choose a real estate agent
  4. Find your dream home
  5. Make an offer and close the deal

To ensure your interests are protected throughout the home-buying process, consider enlisting the services of a real estate agent, a real estate attorney, and a mortgage broker or lender. Connect with an experienced real estate agent when buying your first home.

FAQs: Steps to Buying a House for the First-Time

What credit score is good for buying a house?

There is no benchmark for the right credit score for buying a house, but mortgage lenders often recommend that you have a credit score of 620 or higher.

Who pays closing costs?

The buyer and the seller may be involved in paying the closing costs. However, this may vary depending on the nature of the contract and local customs.

At what age should you start saving for a house?

The age at which you start saving up for your home varies depending on your financial situation and goals. However, you should start saving as early as possible.

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