How can I factory reset my phone?

You can connect it to iTunes and then it will give you an option to RESTORE. Just click on that and it will delete all data and return it to factory settings.

You might have to put it in DFU mode if it is locked to the previous owner. If you can get on the phone you want to make sure that FIND MY PHONE is turned OFF. If it isn't OFF then once you reset everything it will prompt you for previous owners account details to access the phone.

Obviously if you don't know these then you wouldn't be able to use the phone. You would then have to contact the previous to get them to remove the device from their iCloud account. Once this is done you would then be able to use the phone.