I've dealt with quite few of these in the past. Actually, my most recent loan closing was the most ridiculously crazy loan closing I have ever had... but that's a story for another day.
All of the experience I have is for Wisconsin, so if you live elsewhere, take it with a grain of salt.
Typically, when a home is foreclosed on, it is required by law to be "sold on the courthouse steps" (aka Sheriffs Auction) In most cases, the lender that foreclosed on the property will bid the exact amount of the mortgage they hold on the property - seldom will the bid a single dollar more. If you are the high bidder, you are required to put a minimum of 10% down immediately, with the remainder of the balance due within 10 days. If you don't pay off the balance within 10 days, you will lose any downpayment you put on the property, so make sure you are working with someone you can trust to get the job done if you need a mortgage, or have the cash to pay it off.
In most cases, you are not allowed to enter the property before you purchase it. It would be a great idea to peek in windows and ask neighbors if they have been in the home recently to see what the approximate condition of the property is, but regardless of what you see or they say, you still could be setting yourself up for a huge loss. For all you know, there is 4 feet of standing water in the basement because the wall collapsed - or the home has toxic mold, or a huge variety of other disasterous issues.
Don't get me wrong - you can get a great deal (the most recent one I closed was purchased about $60,000.00 less than appraised value) but you can also get screwed (I had one in the past where my client purchased it for approximately 30,000.00 less than appraised value, and spend nearly 90k getting it habitable) so it's a horse a piece.
I would not really suggest purchasing a foreclosed property for a typical first time homebuyer - you'd likely want to be a bit more savvy in the real estate industry, not to mention have a substantial amount saved up for unexpected issues that may arise.
As far as finding foreclosed properties, checking with your local government offices (clerk of courts or register of deeds) would probably be the best bet, or there are sites out there that can help out. One free site that I know of is
www.ushud.com - but I am not sure how helpful that site really is. In addition, check with reputable real estate agents in your area to see if there is anyone that specializes in foreclosed or distressed properties.
If I can help any more or you have any more questions, let me know!