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10 Essential Steps for First-Time Home Buyers

11 May 2023

a hand holding a pen and writing off a checklist marked by boxes

From a distance, the mortgage process can seem foreign and confusing. It can feel like you’re always behind the curve because of the constant influx of new information and tasks to complete.

From reviewing your financials to closing on a home, the whole process can take anywhere from a couple of weeks to several months.

To make things simple, we’ve broken down the home buying process into10steps so you have everything you need to close on your first home loan. With this list, you’ll know what to expect at different stages of the process.

Let’s get started!

Step 1: Assess Your Personal Finances and Credit Score

There are two primary yardsticks to determine if you’re financially prepared to buy a home: your annual income and how much debt vs. savings you have.

Financial experts recommend having three-to-six-months of living expenses in savings before buying a home, and more if you are self-employed or do not have a steady paycheck.

However, your debt-to-income ratio (DTI) is an important number for lenders too. Your DTI measures your monthly debt payments to your monthly gross income. This number helps lenders assess your ability to repay a loan. A high DTI ratio indicates a higher level of debt relative to income, and may make it harder for you to secure new credit or loans.

It’s also highly recommended you know your credit score before moving forward with the home buying process.

You can pull free copies of your credit report yearly from all the three major credit bureaus. This can help you better understand what lenders see when making borrowing decisions. It can also give you the chance to correct any errors before applying for a mortgage.

Step 2: Find Out How Much House You Can Afford

Homes vary widely in overall price for a number of reasons. It may be because of the purchase price, your interest rate on your loan, or because of different upfront or closing costs. To make sure your mortgage loan is manageable, lenders look to see that monthly housing expenses do not exceed 28% of your gross monthly income. This includes monthly mortgage payments, homeowners insurance, property taxes, and sometimes homeowners association fees.

Step 3: Determine Your Down Payment

Let’s dispel a common misconception now: You do not need a 20% down payment to buy a home. Having a 20% down payment is conventional, but it is not required. Some loans like a Federal Housing Administration (FHA) loan only require borrowers to put down about 3.5%; other government-sponsored loan programs may require less, while VA loans don’t require any down payment whatsoever. An FHA loan is a type of government-backed mortgage loan insured by the FHA. The FHA was established to help increase homeownership and provide access to credit for low-to-moderate-income borrowers. FHA loans have since become a popular option for many first-time homebuyers.

Step 4: Get a Pre-approval Letter

Before visiting a single home or open house, it’s worth getting pre-approved for a home loan. A pre-approval letter tells you how much house you can afford and informs the house hunting process. Without this pre-approval, sellers may not think of you as a serious buyer.

It’s important to note that a pre-qualification is not the same as pre-approval. A pre-qualification is more of an estimate, but a pre-approval means the mortgage lender has done some due diligence to verify your financial situation and qualify you as a serious buyer. A pre-approval does not lock in an interest rate, and your interest rate may change by the time you apply for a loan. However, pre-approval can still provide peace of mind and can help you make informed decisions throughout the home-buying process.

Step 5: Connect With a Real Estate Agent

Think of a real estate agent as your co-pilot during the search for a new home. They understand the market, are familiar with home prices, and can help you avoid bad investments by determining the right questions to ask the seller. Meet with several real estate agents to find the right professional for your needs.

Search listings in the area you want to live and see which real state agents are selling houses that are similar in price and size to your ideal home. Be sure to choose a buyer’s agent who will represent your interests and is familiar with the area where you are looking to buy.

Step 6: Start Home Shopping

When house shopping, you may find it helpful to create needs and wants lists. No home is perfect, so these can help you decide on a home that most closely matches what you’re looking for. Whether it’s a specific geographic location or the number of bedrooms a home has, you’ll want to determine what’s really the most important to you.

Aside from browsing online home listings, attend open houses to better understand properties you’re considering.

Step 7: Shop for a Mortgage

The most important thing to remember is you have options and it’s important to shop around, so you should speak with multiple mortgage lenders about your first home loan. You wouldn’t go to one car dealership and buy a car, would you? In fact, talking to more than one mortgage lender can save you thousands of dollars over the life of your loan.

Additionally, be sure to look into what type of mortgage is right for you and remember that many states offer assistance for first-time homebuyers.

Once you are ready to pick up the phone, be sure to have all the required documentation:

  • Income verification: pay stubs for the last 30 days, W-2’s for the last two years, and address records for the last two years
  • Asset verification: the last two months of bank statements to prove you have money for the down payment

Step 8: Put an Offer on Your First Home

Once you have found the right home, it’s time to negotiate an offer. This includes everything from the purchase price to contingencies.

Your real estate agent will guide you through this process and help ensure this is the home you want to buy. If you decide to use a mortgage broker, they will also be at the table when you’re buying a home. If your offer is accepted, you may be required to make a deposit to prove that you are committed to the sale. This deposit payment is called earnest money, and it will typically credit toward the amount you owe on your down payment when you close the deal.

What is a Contingency?

A contingency is a requirement that must be met for the sale to go through, such as a home inspection, appraisal, financial contingency in case a lender refuses to finance a loan, and a title search.

Here is some additional information about the different types of contingencies.

Home Inspection

A comprehensive examination of the purchase property performed by a licensed professional inspector.


A professional estimate of a home's value, based on a detailed evaluation of the property's condition and features. An appraisal is typically performed by a licensed appraiser, who has the training and expertise to determine the value of a property.

Financial Contingency

These exist in case a lender refuses to finance a loan. It is a clause in a contract that details the conditions under which the contract may be terminated if the buyer is unable to secure financing to purchase the property.

Title search

The process of reviewing public records and other relevant documents to verify the ownership history and status of a home.

Step 9: Close the Deal on Your First Home

The last step in the home-buying journey is the closing. At this point in the process, you’ll need the remainder of your down payment (the difference between what you planned to put forth as a down payment and what you have already paid in earnest money) and closing costs, and proof of homeowners insurance. Once the documents have been signed by all parties involved with the transaction, you’re now responsible for repayment of the mortgage loan because you own the house! Congrats!

Step 10: Move Into Your Dream Home

The hard work and research from the mortgage process is finished. Now it’s time to get the house keys, transfer utilities into your name, schedule any renovations or improvements you’re looking to make, and unpack.

You did it, you’re officially a first-time home owner!

Use a First-Time Home Buyer Checklist to Stay Focused

Hopefully after you’ve broken down the homebuying process, getting your first home loan doesn’t seem as intimidating. The path to becoming a homeowner isn’t for the faint of heart, but you’re bound to see the fruits of your labor on move-in day.

Education is empowerment, so make sure to take the time to learn the ins and outs of home buying to find the best deal on your first home loan.

The information provided to you in Own Up blog is intended to be for general informational and educational purposes only and does not constitute legal or tax advice. This blog is not a substitute for obtaining legal or tax advice from a qualified professional. The views and opinions expressed on this blog are solely those of the authors and do not necessarily reflect the official policy or position of Own Up or describe Own Up’s business model. Own Up makes no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the blog or the information, products, services, or related graphics contained on the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk.