Buying your first home is one of the most significant purchases you’ll make in your lifetime. And because it’s a complicated process, first-time buyers can easily get overwhelmed before anything has begun.
In this guide, we walk through 9 key steps of the home buying process so you can know what to expect along the way. Click below to jump to each section:
- How to Find an Agent
- Financial Preparation: How Much House Can You Afford?
- Getting Pre-Approved
- Touring Homes
- Making an Attractive Offer
- Ordering a Home Inspection
- First-Time Home Buyer Negotiations
- Appraisal & Final Document Review
- Closing Day: Welcome Home!
1. How to Find an Agent as First-Time Buyers
The path to homeownership can be complicated process, with lots of forms, paperwork, legal disclosures, negotiations, and moments where everything could fall apart, it’s essential to find a real estate agent who knows the ropes and will back you all along the way.
Shop Around
Finding the right real estate agent for you might mean shopping around a little, but if you want the experience to run smoothly, it’s wise to not settle for good enough. After all, your agent is someone you will work with closely throughout the homebuying process, so while you don’t need to become best friends with your agent, you’ll want to make sure it’s someone you enjoy being around.
Many first-time home buyers will ask friends and family for recommendations and referrals to find a real estate agent they know they can trust. But many more simply start by looking at local real estate websites. Local real estate listing websites have hundreds of agents to search for.
As of March 2022, there are 15,000 brokers listed in the RMLS, serving the Portland Metro and surrounding areas. These are agents with a wide variety of experience, markets they specialize in, communication styles, and personality types.
Be Prepared
Before reaching out to an agent you want to connect with, you should have a rough idea of what you’re looking for, locations you’re interested in, and a general budget. When you finally decide on your agent, they will help you clarify your specific needs. It helps to make your homebuying wishlist.
2. Financial Preparation:
How Much House Can You Afford?
It’s no surprise that you can’t talk about first-time home buyers without talking about money. Regardless of what the market is doing at any given time, preparing to buy a home means being in a stable financial situation with some cash on hand.
Mortgage lenders recommend that home buyers look for a home that is not more than 3 to 5 times your annual household income. Unless you’re purchasing a home with cash, you’ll need a mortgage pre-approval provided by your mortgage lender.
Getting Qualified
Your lender will work with you to get a loan you qualify for and that meets your needs since every homebuyer has different needs. For example, some buyers are focused on keeping their monthly payments as low as possible, while others have a goal of making sure their monthly payments never increase.
Getting pre-approved for a mortgage requires having a good credit score. You can improve your score by paying down credit card balances, continuing to make payments on time, avoiding applying for new lines of credit (credit cards or car loans) until after a home purchase is complete, and avoiding job changes until after a home purchase is complete.
Have Cash on Hand
In addition to preparing financially for your mortgage, first-time home buyers will need cash on hand for other aspects of home buying, including your down payment, earnest money, closing costs, and home inspection.
Not only that, but once the deal is done, don’t put your wallet away too quickly. There are often expenses you’ll need to cover even after the keys are in your hand.
Here’s what you should expect:
- Down payment
- Typically 3% – 20% of the purchase price.
- Earnest money
- Also known as a Good Faith Deposit, this is money you put down to show you’re serious about purchasing a home.
- Earnest money is considered part of your down payment and is usually around 1% of the home purchase price.
- While most of your down payment will be due at closing time, your 1% earnest money is offered upfront.
- Closing costs
- Buyer closing costs run between 2% and 5% of your loan amount.
- Home inspection
- Inspections can range from $800 – $1,500 on average but they can be upwards of several thousand dollars, depending on the inspector and what inspections are being done.
First-Time Buyers: Credit Scores & Down Payments
| Type of Loan | Credit Score | Down Payment |
| FHA Loan | 580+ 500-579 | 3.5% 10% |
| VA Loan | 620 | No down payment |
| USDA Loan | 620 | No down payment |
| Conventional 97 | 620 | 3% |
| 203K Loan | 640 | 3.5% |
| Conventional Loan | 640 | 5%-20% |
3. Getting Pre-Approved as First-Time Buyers
Unlike being pre-qualified, getting pre-approved means that your lender has officially approved you to take out a loan for a certain amount of money.
To get pre-approved, you’ll provide documented financial information to your lender, such as income statements, assets, debts, and a credit report. All these documents are reviewed and verified by your lender before they approve you for your loan amount.
Income Qualifications
| Qualifying Income | Non-Qualifying Income |
| W2 income / salary | Income from lottery winnings |
| Income from part-time jobs | Gambling |
| Income from a second job | Unemployment pay |
| Overtime pay and bonuses | One-time bonuses |
| Seasonal jobs | Non-occupying co-signer income |
| Self-employment income | Unverifiable income |
| Alimony and child support | Income from rental properties |
4. Touring Homes
With your pre-approval in hand, the fun part begins! Touring homes can be exciting, but it can also be exhausting. There’s no telling how many houses you’ll need to look at to find the perfect one.
Your agent will have alerts set up that have filtered all current homes for sale in the databases they have access to and will send you matching options as they come up. When it comes time to tour a home, your agent will make an appointment to show you the home, unless it’s an open house in which case you’ll visit a home at the same time as other interested buyers.
It can be hard to remember all the details of every home you tour, so it’s a good idea to take photos, videos, and notes to remind yourself what you’re seeing. Your agent will also keep notes, keeping in mind what you’ve told them is important to have or avoid in your future home.
5. Making an Attractive Offer
When you find a home you like, it’s important to act quickly. Your agent will prepare the necessary documentation to present to the seller’s agent to begin the offer process.
While your agent can’t tell you exactly what to offer on a house, they will provide detailed guidance that takes into consideration recent sales and buyer activity in the area, the value of the property in its current condition, and how long the home has been on the market for and if there’s likely to be hot competition.
Once the offer is made, it’s a waiting game. If the seller has received several offers, they’ll be reviewing them all with their agent who will be offering guidance on which offer meets the seller’s best interest.
What Does the Seller Want?
It’s important to note that what’s in the seller’s best interest doesn’t always mean sellers will automatically pick the highest bidding offer. Other factors that can make an offer more attractive to a seller include what kinds of repairs a buyer is or isn’t asking for, how much of their offer is in cash versus being financed, any additional costs a buyer is offering to cover, and having a shorter inspection period, which can help move the transaction along quicker.
If a seller is interested in your offer, they may either accept it as-is, or you’ll go through a period of quick negotiations. Stay near your phone during this time period! Your agent will need to relay information and questions back and forth between you and the selling agent, who will be doing the same thing on the other side. The seller may be doing this with multiple offers at the same time, so it’s important to act quickly.
Once your offer is accepted and paperwork is signed, you can take a momentary pause. Congratulations! You are now under contract in what’s called the contingency period. Now inspections, appraisals, and anything else signed under the purchase agreement will take place.
6. Ordering a Home Inspection
Once you’re in contract, you or your agent will schedule a home inspection with a reputable home inspector. In most states, home inspectors are licensed and regulated by a governing body. They are neutral third parties in the home buying process whose job it is to give an unbiased assessment of how structurally sound a home is, and what repairs are suggested or necessary.
During a home inspection, every aspect of the home will be poked and prodded. That means plumbing, drainage, electrical systems, roof/attic space, basement/crawlspace, checking that all doors and windows open and close properly, and any repairs done to the home are up to industry standard and up to code.
After the inspection is complete, the home inspector will present you and your agent with a list of findings. This inspection report will inform your next steps in negotiations.
7. Negotiations for First-Time Home Buyers
At this point in the process, you have a few options to move forward. If there are a lot of very expensive issues with the home, you can safely walk away from the deal without losing any money you’ve put down as long as you’re within your inspection period. Or you can begin to negotiate your initial offer based on repairs that are needed.
Your agent will help guide you toward the significant issues that need to be fixed to keep your home livable and to protect your investment while avoiding nit-picky requests that won’t ultimately help you from a negotiation standpoint.
Repairs Needed?
Often the last thing a seller wants to do is repair work on the home they’re trying to sell, so most sellers are open to giving a credit for the work that needs to be done. In other words, the buyer will agree to take on the responsibility for some repairs after the home is theirs, and in exchange, the seller will credit them back some cash so the buyers can afford to make them.
When it comes to asking for repairs during negotiations, think about the big picture and don’t sweat the small stuff. Tile that needs caulking or a leaky faucet can easily be fixed, but a leaking water heater or unsafe electrical system will offer more leverage for negotiations.
8. Appraisal & Final Document Review
After your final negotiated offer is agreed to, your lender will arrange for a third-party appraiser to provide an independent estimate of the value of the home. This appraisal is shared with the buyers and passed along through agents, so everyone knows the agreed-to price is fair. The loan file then moves on to the mortgage underwriter.
The underwriter is the final stop for all the paperwork to be triple-checked, all information verified, and all terms reviewed with a fine-toothed comb. When the underwriter gives their stamp of approval, all that’s left is signing papers on closing day.
9. Closing Day: Welcome Home!
It’s finally here! Closing day is typically 4 to 6 weeks from the day you entered a contract (see step 5 above: Making an Attractive Offer). On closing day, you’ll sign ownership and lending paperwork, and the purchase funds that have been held in escrow are released to the seller.
Three days before closing, you will have received a closing disclosure from your lender. This document shows your final loan terms and closing costs.
Closing typically happens at the title company. You can usually expect to see your agent, a title company representative, and perhaps your loan officer or any real estate attorneys that have been involved in the transaction.
After paperwork is signed the title company will record the sale with the county, which can take a few hours. After that point, or at the agreed time per the purchase agreement, your agent will be allowed to hand you the keys to your new home!
Congratulations! You are no longer a first-time home buyer – you’re now officially a homeowner!
