Introduction
Buying a first home is a major financial and logistical milestone for U.S. households. According to the National Association of Realtors (NAR), first-time buyers typically represent 30–35% of annual home purchases, though their share fluctuates with mortgage rates, home prices, and economic conditions. First-time buyers also tend to be younger, have lower savings, and rely more heavily on mortgage financing compared to repeat buyers.
Public research from the Consumer Financial Protection Bureau (CFPB) shows that many first-time buyers experience stress and confusion during the process due to unfamiliar terminology, multiple deadlines, and significant upfront costs. As a result, education and preparation play a central role in navigating the transaction.
This article provides a neutral, educational, U.S.-specific, step-by-step checklist describing the typical stages of a first-time home purchase. It explains what commonly occurs at each stage using government data and reputable housing research, without offering advice, recommendations, inducements, or guarantees.
Step 1: Understanding What “First-Time Buyer” Means
In U.S. housing programs, “first-time buyer” does not always mean someone who has never owned a home. According to U.S. Department of Housing and Urban Development (HUD) and many state housing agencies, a first-time buyer may include:
- Individuals who have not owned a primary residence in the past three years
- Single parents or displaced homemakers who previously owned jointly
- Buyers purchasing homes in designated revitalization areas
This definition matters because some educational programs and assistance initiatives reference it, though eligibility varies widely.
Step 2: Reviewing Income, Expenses, and Cash Flow
Before searching for homes, buyers commonly review:
- Gross and net income sources
- Existing monthly obligations
- Irregular or seasonal expenses
According to the Bureau of Labor Statistics (BLS) Consumer Expenditure Survey:
- Housing is the largest expense category for U.S. households, averaging 32–34% of total spending
- Transportation and healthcare are the next largest categories
This context helps explain why lenders and housing educators emphasize total housing cost, not just purchase price.
Step 3: Checking Credit Reports Early
Credit history is a foundational component of mortgage underwriting. Federal law allows consumers to access free credit reports through AnnualCreditReport.com, as authorized by the Fair Credit Reporting Act (FCRA).
According to an FTC study:
- About 20% of consumers had at least one credit report error
- Roughly 5% had errors that could materially affect credit outcomes
Reviewing reports early allows time to identify inaccuracies before entering a purchase contract.
Step 4: Understanding Mortgage Prequalification vs. Preapproval
CFPB consumer education materials distinguish between:
- Prequalification: an informal estimate based on self-reported information
- Preapproval: a more formal review involving documentation and credit checks
Preapproval letters often specify:
- Estimated loan amount
- Loan type
- Validity period
While preapproval does not guarantee a loan, it demonstrates a higher level of financial review than prequalification.
Step 5: Budgeting for Upfront Costs
Down Payments
According to NAR data:
- The median down payment for first-time buyers is typically 6–7%
- Down payment size varies by loan program, household savings, and market conditions
Closing Costs
CFPB data shows:
- Median total loan costs for home purchase loans were $5,954 (2022 data)
- Over 50% of borrowers paid discount points
Closing costs are paid in addition to the down payment and may include lender fees, title charges, taxes, and prepaids.
Step 6: Understanding Ongoing Homeownership Costs
Beyond the mortgage payment, first-time buyers should understand recurring costs such as:
- Property taxes
- Homeowners insurance
- Utilities
- Maintenance and repairs
- HOA or condo fees (if applicable)
Research from the Joint Center for Housing Studies of Harvard University estimates that homeowners spend 1–4% of home value annually on maintenance over time.
Step 7: Choosing a Home Type and Location
According to U.S. Census and NAR data, first-time buyers often choose:
- Condominiums or townhomes
- Smaller single-family homes
- Properties farther from urban cores
Location affects:
- Commute times
- Property taxes
- Insurance costs
- Resale demand
Step 8: Making an Offer and Negotiating Terms
An offer typically includes:
- Purchase price
- Earnest money deposit
- Financing contingency
- Inspection contingency
- Proposed closing date
The structure of offers varies by state and local custom. Real estate professionals assist with contract preparation and coordination.
Step 9: Home Inspection and Due Diligence
Home inspections help identify:
- Structural issues
- Roofing and HVAC conditions
- Electrical and plumbing concerns
Inspection findings may lead to:
- Repair negotiations
- Contract adjustments
- Buyer withdrawal within contingency periods
Step 10: Insurance, Appraisal, and Final Loan Review
Appraisal
Mortgage lenders typically require an appraisal to estimate market value. Appraisal outcomes may affect loan terms if value differs from purchase price.
Insurance
Homeowners insurance must typically be in place before closing. Insurance availability and cost vary significantly by state and risk profile.
Step 11: Closing and Settlement
Closing involves:
- Signing loan and title documents
- Paying remaining closing costs
- Recording ownership
The Consumer Financial Protection Bureau requires lenders to provide a Closing Disclosure at least three business days before closing, allowing buyers to review final terms.
Step 12: Post-Closing Adjustments
After closing, buyers may experience:
- Escrow payment adjustments
- Tax or insurance changes
- Utility account transitions
CFPB research shows that payment changes often occur within the first year due to escrow recalculations.
Common First-Time Buyer Misunderstandings
Public housing research highlights frequent misconceptions:
- Believing mortgage payment equals total housing cost
- Underestimating repair expenses
- Confusing loan approval with preapproval
Education helps contextualize—but does not eliminate—risk.
Why This Checklist Matters
Studies consistently show that first-time buyers:
- Face steeper learning curves
- Experience higher stress levels
- Are more sensitive to unexpected costs
Step-by-step awareness improves preparedness and reduces surprises.
Summary: A U.S. Data-Based Perspective
From a U.S. consumer education standpoint:
- First-time homebuying is a multi-stage process
- Each step has financial, legal, and timing implications
- Preparation, documentation, and awareness are critical
- Outcomes vary by market conditions and individual circumstances
Understanding the process helps first-time buyers navigate complexity more confidently.
Author Information
Written by:
Asim Iftikhar — Real Estate Contributor, ACT Global Media
Editorial Disclosure
This article is provided for general informational purposes only and does not constitute real estate, mortgage, financial, legal, or tax advice.
Regulatory Notice
Homebuying processes, costs, and requirements vary by state, lender, and individual circumstances. Information is based on publicly available U.S. sources.
