Buying your first home is one of the most meaningful and long-lasting financial decisions you will ever make. It's a major event in many people's lives -- which is why it's important to understand the full picture of the home buying process. Being aware of all of the options available to you -- whether it comes to choosing your realtor, mortgage lender or type of mortgage -- will help you make the right decision for you. 

Here is everything you need to know about buying a home for the first time in 11 simple steps. 

What is a first-time homebuyer? 

Generally speaking, a first-time homebuyer hasn't owned a home before. That may seem obvious, but the definition of a first-time homebuyer is broader than you might expect. You could also qualify as a first-time homebuyer if you've been a homeowner in the past -- as long as you haven't owned a home for at least three years. 

First-time homebuyers are often eligible for specific programs and discounts that can make buying a home more affordable. For example, an FHA loan, which is backed by the Federal Housing Administration, is designed to help first-time buyers. It requires as little as a 3.5% down payment, for example. And while most mortgages require a credit score of at least 620, you can secure an FHA loan with a credit score of 580. If your credit score is slightly lower, say between 500 and 579, you could still qualify for an FHA loan, but the down payment requirement jumps up to 10%. 

There are first-time homebuyer programs available at the state level, too, so be sure to look into local programs in your area.

Now we'll walk you through the steps of buying a home. Here's how to get started.

1. Review your finances

You need to have your finances in order to be approved for a mortgage. Mortgage lenders want to see that you have good credit, so your credit score is one of the most important factors taken into consideration. That's why it's a good idea to prioritize paying down high-interest debt before you prepare to buy a house, and make sure to check your credit report. Through the end of this year, you can receive one free credit report per week from each credit bureau through AnnualCreditReport.com.

In general, lenders will want to know almost everything about your financial life. You'll be required to show proof of income (you'll need supporting documents like your W-2, pay stubs and an employment verification letter from your job) so they know you can afford the monthly payments. Mortgage lenders will also consider your debt-to-income ratio, which is the amount you pay toward all your debt each month divided by your monthly income. This includes auto loans, student loans, credit card debt and any other debt you're making monthly payments on. It's another reason why it's critical to pay down your consumer debt first. 

You also need to know how much you can afford overall. A general rule of thumb is that housing should take up no more than 30% of your monthly income. For example, if your combined income between yourself and your partner is $6,000 a month, your monthly payments should be no more than $1,800. You can use CNET's mortgage calculator to better calculate how much house you can afford. 

2. Determine how much down payment you can afford

Another reason to pay off debt before buying a home is that you can free up the money you were putting toward credit card and loan payments to save for a larger down payment. A down payment of 20% or more may help you secure a lower interest rate, lower your monthly payments and make you an attractive candidate to mortgage lenders. While first-time homebuyers don't necessarily need to make large down payments, if you're able to pay more upfront or solicit family help with your down payment, it can make you a more viable applicant, which can help you secure a home more easily in a competitive housing market. 

There's another reason to pay more upfront if you can afford to -- if your down payment is less than 20% for a conventional loan, you'll be required to purchase private mortgage insurance, which will be tacked onto your monthly mortgage payments, boosting your monthly housing expenses. (Note: You can get rid of PMI once you've built up 20% equity in your home.)

If you can afford even more, we don't recommend putting all the money you have in your bank account toward a down payment. You also have to be prepared to pay for things like closing costs and other fees associated with the purchase process. Plus, depending on your home inspection, there may be repairs you'll need to pay for after receiving the keys to your home. 

If you can't afford a 20% down payment, there are programs available for first-time homebuyers to help. 

3. Know your home loan options

Knowing all of the types of mortgages available can help you find the best home loan program for your financial situation. While the most common type of home loan is a conventional 30-year fixed mortgage, which refers to a traditional private loan from a bank, the right loan type for you will vary depending on your specific situation. 

Here are some of the most popular types of home loans:

FHA loans : This home loan is backed by the Federal Housing Administration, a government agency, and typically requires a minimum credit score of 620, a down payment as small as 3.5% and the purchase of a Mortgage Insurance Premium, which cannot be removed from the home loan until you've built up at least 20% equity in your home. 

VA loans : A VA loan requires a 0% down payment and is only available to current or former members of the military and their spouses. VA loans are backed by the US Department of Veterans Affairs and generally only require a 580 credit score. They also have lower interest rates than other loans, which can save you tens of thousands of dollars over the course of your mortgage. 

USDA loans : A USDA home loan is backed by the US Department of Agriculture and is geared toward homebuyers in designated rural areas. A USDA loan requires a minimum credit score of 640 and may not require a down payment. It also offers a lower interest rate than most other kinds of loans.

Fannie Mae Conventional : Conventional mortgages are not backed by the US government and are instead backed by traditional banks and financial institutions. If you're not eligible for a government-backed home loan, conventional loans, which include 30-year fixed-rate and 15-year fixed-rate mortgages, are a good alternative.  This home loan requires a minimum 3% down payment and a credit score of at least 620. Conventional home loans are the most common mortgage types in the US and 90% of Americans have a 30-year, fixed-rate loan. 

Freddie Mac Home Possible : Home Possible loans are designed for lower-income buyers -- your income, combined with the income of any co-borrower, cannot exceed 80% of your area's median income to qualify. The minimum required down payment is 3% and you generally need a credit score of 660.

Fannie Mae HomeReady Mortgage : HomeReady mortgages are similar to Home Possible loans, but you can have a credit score as low as 620. It also only requires a 3% minimum down payment, which you may be able to cover through grants or gifts from sources like non-profit organizations, churches or family members. No minimum personal funds are required. 

Good Neighbor Next Door : This home loan program is available to prospective homebuyers who are law enforcement officers, teachers, firefighters and EMTs and are interested in buying a home in a qualifying revitalization area. The Good Neighbor Next Door program offers you a 50% discount on the list price of the home as long as it remains your primary residence for at least 36 months.

Energy Efficient Mortgage : Anyone who qualifies for a home loan will qualify for an Energy Efficient Mortgage. This type of loan can help you save on utility bills and afford energy-efficient improvements to your property -- savings you can use to pay off your mortgage every month. The Federal Housing Administration insures the mortgage, including the costs of the energy improvements you make to your home. You can use an EEM to purchase a new home or refinance your existing mortgage.

4. Find the right real estate agent

Next, you'll want to find a professional, experienced realtor who is well reviewed online, and understands the market where you're looking for your first home. You can reach out to local brokerages and interview agents until you find one that feels right to you. You'll want to work with an agent who communicates well with you. Trust your gut and make sure they're responsive and knowledgeable before signing any paperwork.

Think of your realtor as your manager during the process -- use them as a resource to source the other professionals you work with. For example, a trusted realtor can help you find the right mortgage lender because they may know about specific rates that you wouldn't otherwise be aware of, which could save you thousands of dollars over the life of your loan.

"If I know that someone is looking to buy in a certain area, I will send them to a certain lender because I know they have special rates available in particular areas," said Adam Shulman, a realtor with Remax Destiny in Cambridge, Massachusetts.

Of course, the lender you work with is ultimately up to you. But you can lean on your real estate agent for support and advice.

5. Compare rates from different lenders and get prequalified

While mortgage rates fluctuate on a daily basis depending on what's happening with the economy, you still want to shop around to find the best rates, as they will vary lender by lender. Sourcing multiple quotes from multiple lenders will save you money -- borrowers can save an average of $1,500 just by getting one extra quote, and an average of $3,000 by getting five quotes, according to Freddie Mac. 

To gain access to rates online, you'll typically need to provide some basic financial information, which the lender will use to prequalify you for a mortgage. Prequalification does not guarantee these rates, but rather allows you to view rates you're likely to lock in based on your finances. This step, which is different than mortgage preapproval, typically does not require a credit check.

When reviewing interest rates, you also need to factor in lender fees, such as underwriting, origination and points fees. If a lender charges high fees, you could actually end up paying more even if they offer a lower interest rate. Lender fees, combined with the interest rates, create your annual percentage rate, which is the actual rate you'll pay for the home loan. 

"Too many people just shop by interest rate," said Frank Jacovini, associate broker with Remax Century in Philadelphia. "But the fees are built into the calculation of the APR. The APR gives you a true picture of the cost of that loan."

For example, one lender may offer a 3.9% interest rate while another is offering a 3.75% interest rate -- but the lender offering a 3.75% interest rate may be charging you a $5,000 origination fee, making your APR higher. That's why looking at the APR is a better way to compare options across lenders. 

6. Get preapproved

Getting preapproved for a mortgage gives you an estimate of what you'll be able to borrow and verifies your creditworthiness. This allows the sellers and everyone you're working with to know that you can actually afford the offer you're making on your first home. In this competitive market, getting preapproved is crucial.

To get preapproved, you'll need to submit financial documents, like pay stubs and bank statements, to a lender. They'll also run a credit check. You'll then receive a preapproval letter indicating how much of a home loan you're preapproved for. Keep in mind, this amount may vary from the amount you'll be officially approved for later on, but it's a good barometer to use when shopping for homes.

If you're not preapproved for a mortgage in today's market, it's likely the seller won't even entertain your offer, said Jacovini. Having a preapproval letter is especially valuable in this record-high housing market. 

"If there are multiple bids as soon as a house comes on the market, you need to be able to move fast," said Jacovini. "That's why having the preapproval first is important -- if you're going to make an offer on a new listing that just hit the market, you need that preapproval to get your offer out within a day or so."

7. Shop for your home

This is the part where you get to scroll through Zillow -- and not just window shop. Looking for a home online has become something of a national pastime, but you should also go to local open houses, as well as talk to realtors, brokers and other people in your neighborhood who have recently purchased their first home. 

You'll want to decide at this step what features are important to you in a home: the number of bedrooms and bathrooms, square footage and home type, for example. Let your real estate agent know what are must-haves in a home and they'll be able to send you houses to review as soon as they hit the market.

Don't buy the first house you see. And though it may be tempting in this skyrocketing housing market, avoid buying a home you're not able to view in person, if possible.

8. Make an offer, quickly

You want to put your strongest foot forward when making an offer as a first-time homebuyer. Making your highest and best offer first is usually what realtors recommend in order for it to be competitive, which is particularly important right now. 

In today's extreme seller's market, you need to be prepared to make that offer quickly, which is why it's critical you have all of your finances and documents ready to go. Normally, you might have contingencies or concessions from the seller in your offer, which dictate conditions the seller must meet before the closing date, but in today's market many buyers are avoiding contingencies in order to make their offers more attractive.

9. Negotiate closing costs

For a buyer, closing costs are fees you pay for your mortgage lender's services. They include expenses like title insurance, lawyer fees and your home appraisal, as well as taxes. Sometimes you can roll your closing costs into your loan so you don't have to pay them out of pocket. In some cases, you may even be able to get your closing costs covered as a gift or a grant through a charitable organization if you meet certain eligibility requirements. 

Your closing costs will add up to thousands of dollars. The average closing costs for a single-family home purchase were $6,387 in the first half of 2021, but they vary widely depending on where you live. For example, in high-demand places such as New York, average closing costs can be as high as $17,000. Typically, your closing costs will be around 2% to 5% of your loan. 

10. Schedule an inspection

You may be tempted to waive a full inspection in this red-hot housing market, but it could cost you thousands of dollars down the line if any critical issues are overlooked in the home you're buying. Typically, you have an inspection performed on the home once you make an offer, but these days another option in such a tight market is to do a full inspection before making an offer.

Paying for a home inspection before making an offer may seem strange, but it can offer peace of mind without delaying your offer. "You can still get an inspection done, but your offer is stronger because it won't be contingent on the results of the inspection," said Shulman. As a buyer, you're responsible to pay for the inspection: The average cost ranges from $300-$500, but can be as high as $900 in highly sought-after areas. 

A thorough inspection should take anywhere from 2 to 4 hours. You should avoid the recent trend of "walk and talk" inspections that only take a quick look at the home and overlook the rest of the inspection process. Make sure you receive a written report after an inspection -- the inspector is legally obligated to provide you with the report. 

11. Prepare to close on your home

Before your closing date, you need to make sure your investment in your new home is protected by purchasing homeowners insurance. Most mortgage lenders require you to buy homeowners insurance, so you need to factor it into your monthly budget when figuring out how much you can afford. For example, the average homeowner spends $1,383 on homeowners insurance for a $250,000 house, which means you'd need to factor in an additional $115 per month to your budget. 

The day you close on your home is the day when the property is actually transferred to you and when you'll be expected to pay the closing costs, which are generally around 2% to 5% of your loan total. Closing costs must be paid with a cashier's check from your bank, never a personal check. Before your closing date, you need to make sure all of your paperwork is signed -- by both buyer and seller -- so the house officially can become yours. This is also when the title company needs to verify your identity with a valid photo ID. You'll need proof that you've already purchased homeowners insurance if your bank requires it. Make sure you have all of your documents and paperwork lined up in advance so you're ready to go the day of. 

Don't forget to factor in the cost of your physical move, either. Hiring a moving company can cost you hundreds or thousands of dollars depending on the amount of furniture you're moving and the location of your move. Moving from a three-bedroom on average can cost anywhere from $480 to $800, according to Zillow.