What’s the Real Order of Steps When Buying Your First Home?
Buying your first home is exciting, but the process can feel confusing when you do not know what happens first, what comes next, or when you should contact a mortgage lender.
Should you find a real estate agent first? Should you start looking at homes? How much money do you need saved? And when should you apply for a mortgage?
The good news is that buying a home follows a logical sequence. When you understand the order, you can make better decisions, avoid unnecessary stress, and be better prepared when the right home comes along.
Here is the step-by-step process I recommend for first-time homebuyers.
Step 1: Review Your Finances and Set a Realistic Budget
Before you start looking at houses, take an honest look at your finances.
Review your income, monthly expenses, existing debts, credit history, and savings. Determine how much you can comfortably afford to spend each month on housing.
What Your Monthly Housing Payment Can Include
Principal and interest on your mortgage
Property taxes
Homeowners insurance
Mortgage insurance, if required
Homeowners association dues, if applicable
Plan for Costs Beyond the Monthly Payment
You also need money for a down payment, closing costs, moving expenses, and unexpected repairs.
For example, you might qualify for a mortgage payment of $2,000 per month. However, if that payment leaves little money for groceries, retirement savings, vacations, or emergencies, buying a less expensive home may be the smarter decision.
The goal is not to buy the most expensive home you qualify for. It is to buy a home you can comfortably afford.
Step 2: Talk to a Mortgage Lender
Once you have reviewed your finances, contact a mortgage lender before you begin seriously shopping for homes.
A mortgage lender can review your financial situation, explain your loan options, and help you understand what you may qualify to purchase.
Loan Options for First-Time Buyers
Depending on your circumstances, you might qualify for a conventional, FHA, VA, or USDA loan. Some first-time buyers may also qualify for down payment assistance programs.
You do not necessarily need a 20% down payment to buy a home. Some mortgage programs allow qualified borrowers to purchase with substantially less money down.
This is also the time to discuss your credit score, employment history, monthly debts, available funds, and estimated closing costs.
Starting here helps you identify potential obstacles early, when you have more time to address them.
Step 3: Get Preapproved for a Mortgage
After reviewing your financial situation, work with your lender to obtain a mortgage preapproval.
During this process, the lender reviews information such as your income, assets, debts, and credit history to determine whether you appear eligible for a mortgage and how much you may be able to borrow.
A preapproval letter helps establish a realistic home price range and shows sellers that you have taken meaningful steps toward financing your purchase.
Preapproval Is Not Final Approval
Preapproval is not a final loan approval. Your financial information, the property, and the loan must still meet the applicable requirements before the mortgage can close.
One important point: your preapproval amount is a ceiling, not a spending target. You should still choose a monthly payment that works for your household.
Step 4: Find a Real Estate Agent
With your financing plan and budget taking shape, find a real estate agent who understands your needs and the local market.
Your agent can help you identify suitable properties, schedule showings, evaluate comparable sales, prepare an offer, and navigate the purchase agreement.
Before you begin touring homes, discuss your priorities. Think about location, commute, number of bedrooms, property condition, school preferences if relevant, and how long you expect to stay in the home.
It is also worth discussing the agent’s representation agreement and how the agent will be compensated before committing to work together.
How Your Lender and Agent Work Together
Your mortgage lender and real estate agent serve different roles. Your lender helps you finance the purchase, while your agent helps you navigate the property search and negotiation.
When these two work together and communicate effectively, the process can be much smoother.
Step 5: Shop for Homes Within Your Budget
Now you are ready to start looking seriously.
Use your preapproval and personal budget to narrow your search. Remember that two homes with the same purchase price can have different monthly costs because of property taxes, insurance, association fees, and other expenses.
For example, a house with a lower purchase price but significantly higher property taxes might cost more each month than a slightly more expensive home elsewhere.
Look Beyond the Finishes
Look past the kitchen, flooring, and paint. Pay attention to the roof, windows, heating and cooling systems, foundation, and signs of water damage. These items can affect your future maintenance costs.
You do not have to find a perfect house. You need to find a home that fits your budget, meets your needs, and makes sense for your plans.
Step 6: Make an Offer and Negotiate the Terms
Once you find the right home, your real estate agent can help you prepare an offer.
The offer includes more than the purchase price. It can also address the earnest money deposit, proposed closing date, financing terms, inspection provisions, and other conditions.
What Is Earnest Money?
Earnest money is a deposit made according to the purchase agreement to demonstrate your commitment to the transaction. It is typically credited toward your purchase funds at closing, subject to the contract terms.
Protect Your Interests
Do not focus only on winning the house. Focus on purchasing it under terms that protect your interests and fit your financial situation.
Before signing, understand the deadlines and conditions in your agreement, including any financing and inspection contingencies.
Once the seller accepts your offer, the transaction moves into the financing and closing phase.
Step 7: Complete Your Mortgage Application and Loan Processing
After your offer is accepted, work with your lender to move from preapproval to a full mortgage application and underwriting.
Your lender may request updated pay stubs, bank statements, tax documents, employment information, explanations of deposits, or other records needed to verify your application.
The lender also orders or coordinates the property appraisal and evaluates whether the home meets the applicable requirements for the loan program.
During underwriting, the lender reviews your financial information and the property to determine whether the mortgage can receive final approval.
Keep Your Finances Stable During Underwriting
This is an important time to keep your finances stable.
Avoid opening new credit cards, financing a vehicle, taking out personal loans, or making large unexplained deposits or withdrawals without discussing them with your lender first. New debt or changes in your financial situation can affect your qualification.
Respond promptly to document requests. Delays in providing information can slow down the approval process.
Step 8: Schedule a Home Inspection and Arrange Homeowners Insurance
The home inspection and mortgage process often happen at the same time.
A home inspection evaluates the property’s physical condition and can uncover issues that are not obvious during a showing. These might include roof problems, plumbing leaks, electrical concerns, or foundation issues.
Home Inspection vs. Appraisal
An inspection is different from an appraisal. The inspection focuses on the home’s condition, while the appraisal helps establish the property’s value for the mortgage transaction.
Review the inspection findings and decide whether you want to negotiate repairs, request a credit, proceed as planned, or exercise a contractual right to cancel. Your options depend on the purchase agreement and applicable terms.
Arrange Homeowners Insurance
You will also need to arrange homeowners insurance and provide proof of coverage as required by your lender before closing.
Step 9: Receive Final Loan Approval and Prepare for Closing
Once the lender has reviewed the required documents and completed the necessary checks, the loan can move toward final approval and closing.
Your lender and closing agent coordinate the remaining details, including the final loan terms, closing costs, title work, and funds needed to complete the purchase.
Review Your Closing Disclosure
For most covered mortgage transactions, you must receive a Closing Disclosure at least three business days before closing. This document outlines your final loan terms, projected payments, and closing costs.
Compare it with your earlier Loan Estimate. Make sure the numbers make sense, and ask about any differences you do not understand.
You should also confirm the amount you need to bring to closing and the approved method for delivering those funds.
Protect Yourself from Wire Fraud
Be especially careful with wire transfers. Mortgage closing scams can involve fraudulent messages that appear to come from a real estate agent or title company. Independently verify wiring instructions using a trusted phone number before sending money.
Step 10: Complete the Final Walkthrough and Close on Your Home
Before closing, complete a final walkthrough of the property.
Confirm that the home is in the agreed-upon condition, the seller has moved out as required, and any negotiated repairs have been completed.
What Happens at Closing
At closing, you sign the mortgage and purchase documents, provide the required funds, and complete the final steps for transferring ownership.
Once the transaction is completed and the necessary funds are disbursed, you receive the keys according to the closing arrangements.
Congratulations. You are a homeowner!
The Real Order of Buying Your First Home
Here is the process in a quick-reference list:
Review your finances and set a budget.
Talk to a mortgage lender.
Get pre-approved.
Find a real estate agent.
Shop for homes.
Make an offer and negotiate.
Complete your mortgage application and underwriting.
Complete the inspection and arrange homeowners insurance.
Receive final loan approval and prepare for closing.
Complete the walkthrough, sign the documents, and get the keys.
Some steps overlap. For example, your home inspection, appraisal, insurance arrangements, and mortgage underwriting may be underway at the same time.
The important thing is to complete the early financial preparation before committing to a home purchase.
Final Thoughts
Buying your first home does not have to be overwhelming. The process becomes easier when you understand what needs to happen and when.
Our biggest piece of advice is to start with your finances and mortgage pre-approval before seriously shopping for homes. That gives you a clearer budget, helps you understand your options, and puts you in a stronger position when you find a home you want to buy.
You do not need to know everything about mortgages before getting started. You need a clear plan, reliable communication, and a team that helps you understand each step.
If you are thinking about buying your first home in Sioux Falls or southeastern South Dakota, a Fairway Heartland loan officer is happy to help you understand your mortgage options, determine a realistic budget, and prepare for the road ahead.
Contact Fairway Heartland to discuss your homebuying plans.
Frequently Asked Questions
Should I contact a mortgage lender or a real estate agent first?
Start by reviewing your finances and speaking with a mortgage lender. Getting preapproved helps you establish a realistic price range before you begin seriously shopping. You can identify a real estate agent around the same time.
How long does it take to buy a first home?
The timeline depends on how quickly you prepare your finances, find a home, negotiate an offer, and complete the mortgage process. Finding a home can take weeks or months, while an accepted offer is often followed by several weeks of financing and closing work. Your specific timeline depends on the transaction.
Do I need 20% down to buy my first home?
No. Qualified borrowers may be able to purchase with a smaller down payment through conventional, FHA, VA, USDA, or other eligible programs. The amount required depends on the loan program and your circumstances.
Does mortgage preapproval guarantee that I will get a loan?
No. Preapproval is an initial assessment of your ability to qualify. Final approval depends on verification of your financial information, the property, and the lender’s requirements.
What happens after my offer is accepted?
You complete the mortgage application process, provide supporting documents, arrange the home inspection and homeowners insurance, and work through appraisal and underwriting requirements. Once the loan and transaction are ready, you prepare for closing.
What is the biggest mistake first-time homebuyers make?
One common mistake is shopping based on the maximum mortgage amount rather than a comfortable monthly payment. A home purchase affects your finances long after closing, so leave room in your budget for repairs, savings, and everyday living expenses.