Buying your first home is not just a property search. It is a finance, contract and settlement process, and it works best when the money is sorted before the Saturday open-home scrolling starts.
Most first home buyer problems trace back to the same mistake: shopping before checking borrowing capacity, deposit structure, scheme eligibility and what lenders actually require. This guide gives you the honest order of operations. Finance first, property second.
If you already know your numbers and want to compare actual loan pathways, head to our first home buyer loans page or use the form below to speak with a specialist.
How to buy your first home in Australia
The process works best when finance leads the decision, not property search. Here are the six steps in the right order.
Before making a serious offer
- Borrowing capacity formally assessed, not just a calculator estimate
- Deposit and all buying costs confirmed as separate line items
- Scheme eligibility checked against your target price and location
- Pre-approval in place with a suitable lender
- Property type checked against lender security requirements
- Building and pest inspection arranged before committing
What happens from contract to settlement
- Property valuation ordered by the lender
- Formal loan approval issued after valuation and final checks
- Mortgage documents signed and returned to the lender
- Building insurance arranged and confirmed before settlement
- Conveyancer manages title transfer and settlement preparation
- Funds transfer and title completion on settlement day
1. Work out your real budget
Your real budget is not the maximum a calculator shows. It is your deposit, minus buying costs, minus an emergency buffer, tested against the loan amount a lender will actually approve after reviewing your full financial picture.
Here is where most buyers trip up. They treat their entire savings balance as deposit money and forget that stamp duty, legal fees, inspections and insurance all come out of the same pot before they hold a key. So a buyer with $80,000 saved does not have an $80,000 deposit. They have a deposit minus everything else.
2. Check your borrowing capacity
Borrowing capacity is the loan amount a lender will consider after reviewing your income, declared expenses, debts, credit card limits and serviceability at the buffered rate. And it can land well below what you expected, especially if you carry car finance, HECS debt, or a credit card with a high limit sitting unused in your wallet.
A proper finance assessment tells you whether your target purchase price is realistic before you start competing for properties. A browser calculator does not. The difference matters when you're about to sign a contract.
3. Check scheme eligibility before choosing a property
Schemes can affect your deposit requirement, stamp duty position and total upfront cash needed. But each scheme has price caps, state-specific rules, occupancy requirements and lender participation lists. A property that sits above the relevant cap, or falls in the wrong state category, may not qualify even if you personally meet all the buyer criteria.
In short: check the scheme rules before you fall in love with a listing. Not after.
4. Get finance assessed before making serious offers
Get your finance assessed before you make serious private treaty offers or bid at auction. Pre-approval can help set a working budget, but keep in mind it is usually conditional. Formal approval still depends on the property, valuation, contract and final documents.
If you're buying at auction, this matters even more. Auction contracts are typically unconditional from the fall of the hammer, so a casual calculator result is not enough preparation. You need to know your ceiling before you raise your hand.
5. Choose a property that the lender will accept
Lenders do not accept every property as security. Apartments under a minimum internal size (often 40 to 50 square metres net), high-density buildings in certain postcodes, off-the-plan purchases, unusual titles, structural issues and regional locations can all trigger restrictions.
This catches buyers off guard because they focus entirely on whether they can afford the repayments. But the property also needs to pass the lender's security test. Both need to work.
6. Move from contract to settlement
After signing, the loan moves into formal approval, valuation, mortgage documents and settlement preparation. Your conveyancer handles the legal side while the lender finalises loan documents and confirms funds availability.
You will typically need building insurance confirmed, signed loan documents returned, cleared funds for settlement and confirmation of adjustments for council rates, water and strata. Settlement is complete when funds transfer and the title process finishes.
Cooling-off periods vary by state and territory and do not apply to auction purchases. In most states a private treaty buyer has a short cooling-off window after signing, but the length, cost of withdrawal and whether the period can be waived all differ. Confirm these details with your conveyancer before signing anything.
Deposit, LMI and upfront costs
A 20% deposit plus buying costs is still the cleanest target for most buyers. It reduces or eliminates lenders mortgage insurance and gives the lender more comfort with the application. Some buyers use a lower deposit pathway if they meet scheme and lender requirements, and that can work well. What matters most is understanding the full cash requirement, not just the deposit percentage.
What does it actually cost to buy your first home?
The deposit is only part of the picture. The table below shows what buyers commonly forget to budget for, and the worked example that follows puts real dollar figures behind it.
| Cost | What it means | Why first home buyers miss it |
|---|---|---|
| Deposit | Your cash contribution toward the purchase price. Minimum varies by lender and pathway. | They treat their entire savings balance as deposit money and leave nothing for costs. |
| Stamp duty / transfer duty | State or territory tax on the property transfer, subject to concessions or exemptions for eligible FHBs. | They assume every first home buyer pays nothing, which is not always true above certain thresholds. |
| Conveyancing / legal fees | Contract review, legal checks and management of the settlement process. | They budget for the lender and completely forget they also need to pay a conveyancer. |
| Building and pest inspection | Reports that check the property's condition before you commit to purchase. | They skip it to save a few hundred dollars, then discover defects after settlement. |
| Lender fees and valuation | Application, package, settlement or valuation costs charged by the lender. | They compare interest rates and forget setup costs exist. |
| LMI if applicable | Insurance protecting the lender when the loan-to-value ratio is above 80%. Paid by the borrower. | They assume LMI protects them, or assume a scheme removes all lender risk. It does not. |
| Building insurance | Required before or at settlement. Contents insurance is separate and also worth budgeting. | They leave insurance until the final week and get caught short at settlement. |
| Settlement adjustments | Pro-rata council rates, water, strata and other charges adjusted at settlement date. | They do not realise additional funds beyond the contract price may be needed. |
| Moving and connection costs | Removalists, utilities, internet setup, cleaning and immediate household expenses. | They spend all available funds at settlement and have nothing left for practical setup. |
Reference cost example: NSW, $700,000 purchase
The following is a general reference example only. Actual figures vary by lender, location, property type, scheme eligibility and individual circumstances. Always get your own figures from a broker, conveyancer and lender before committing.
First home buyer grants and schemes
Schemes can reduce the deposit barrier or cut upfront government costs. But they are not a substitute for loan approval. You still need to pass serviceability, meet lender requirements and buy a property the lender accepts as security, all independent of any scheme you qualify for.
Home Guarantee Scheme: key changes from 1 October 2025
The Australian Government expanded the Home Guarantee Scheme (HGS) significantly from 1 October 2025. The headline changes: no annual cap on places (previously 35,000), no income test, and higher property price caps across most locations. In practice, every eligible first home buyer with a 5% genuine deposit can now apply through a participating lender without worrying about missing out on limited places.
| Location | Property price cap (from 1 Oct 2025) |
|---|---|
| Sydney + NSW regional centres (Illawarra, Newcastle, Lake Macquarie) | $1,500,000 |
| Regional NSW (other areas) | $800,000 |
| Melbourne + Geelong | $950,000 |
| Brisbane + QLD regional centres (Gold Coast, Sunshine Coast) | $1,000,000 |
| Perth (WA) | $850,000 |
| Darwin (NT) | $750,000 |
| All other capitals and regional areas | See Housing Australia for full table |
Source: Housing Australia, scheme expansion announcement. Caps are subject to change. Always verify the current cap for your specific location before choosing a property.
Home Guarantee Scheme (First Home Guarantee)
Eligible first home buyers can purchase with a 5% deposit and skip LMI entirely. No place limits or income caps apply from 1 October 2025. You must buy as an owner-occupier and move in within the eligible timeframe. Only available through participating lenders.
Housing Australia: First Home GuaranteeFirst Home Super Saver Scheme (FHSSS)
This scheme lets eligible buyers use voluntary super contributions toward a first home deposit. You can potentially release up to $15,000 per financial year (and a maximum of $50,000 total), with possible tax benefits. ATO processing times, withdrawal rules and eligibility conditions apply.
ATO: FHSSSFirst Home Owner Grant (FHOG)
A state or territory grant for eligible buyers of new homes or new builds. The grant amount and eligibility thresholds vary significantly by state. In NSW, the FHOG of $10,000 applies to new homes valued up to $600,000. In VIC, up to $10,000 for new homes in metro areas. Check the relevant state revenue office for current rules.
SRO Victoria: FHOGStamp duty / transfer duty concessions
Most states offer concessions or exemptions for eligible first home buyers. In NSW, the First Home Buyers Assistance Scheme provides full exemption from transfer duty on properties up to $800,000 and a sliding-scale concession to $999,999. In Victoria, full exemption applies on new and established homes up to $600,000 with a concession to $749,999.
Revenue NSW: First Home BuyersGuarantor home loan
A family member providing limited security support can help some buyers avoid LMI without relying on a government scheme. These structures are lender-specific, so not every lender offers them and not every family situation will meet the requirements. Both the buyer and guarantor need independent legal and financial advice.
PFH guarantor guideImportant: schemes do not guarantee approval
A scheme may reduce the deposit you need, but it does not force a lender to approve your loan. You still need to pass income and serviceability testing, have an acceptable credit history, show a genuine savings pattern and buy a property the lender accepts as security. Scheme eligibility and loan approval are two separate hurdles.
What lenders assess for first home buyers
Lenders look at two things: whether you can repay the loan, and whether the property works as security. A strong deposit helps, but it does not override weak serviceability, credit issues or a property type the lender will not accept.
One number to remember: APRA requires all lenders to test your repayment capacity at the loan rate plus a 3% buffer. So a loan at 6% is tested at 9%. That buffer alone knocks tens of thousands off what you can borrow compared to a simple calculator.
For first home buyers, the most common approval risks are borrowing capacity, living expenses, existing debts and credit limits, property type and savings history. Here is what lenders typically look at:
Type, stability and tenure. PAYG income is the simplest to assess. Casual, contract and self-employed income requires more documentation and lenders may treat it more conservatively, sometimes significantly so.
Lenders compare your declared monthly expenses against benchmark figures and use whichever is higher. High declared expenses directly reduce how much you can borrow. Understating them is not the answer either, because lenders verify.
Credit card limits count as if fully drawn, even if the balance is zero. That $10,000 limit card you never use? The lender assumes you owe all of it. Car finance, personal loans and BNPL facilities all reduce borrowing capacity too.
Outstanding HECS-HELP debt reduces net income in serviceability calculations. The impact depends on your total debt level and compulsory repayment rate. It can meaningfully shrink your borrowing capacity, and many buyers do not factor it in.
Late payments, defaults, credit enquiries and any prior bankruptcy all get assessed. Even multiple recent credit applications (hard enquiries) can raise a flag, because lenders wonder why you are applying in several places at once.
Lenders want to see a genuine savings pattern over time, not a recent lump sum transfer from a relative. Regular contributions from your income over three to six months or more show the financial discipline lenders are looking for.
The lender needs to know where the deposit came from. Genuine savings, gift funds, FHSSS withdrawals and guarantor equity each have different evidence requirements and may affect which lenders you can use.
Not all properties qualify as acceptable security. Small apartments, high-density buildings, certain off-the-plan purchases, unusual titles and some regional locations carry restrictions with many lenders. Buyers with non-standard income may also want to explore low doc options.
The higher the LVR, meaning the less deposit relative to the purchase price, the more conservative the lender becomes. Some lenders apply stricter criteria at LVRs above 80% or 90%, regardless of scheme eligibility.
Lenders test your ability to repay at the loan rate plus a 3% buffer under APRA guidelines. If the loan fails serviceability at the buffered rate, it will not be approved regardless of how comfortable you feel at the standard rate.
Documents to prepare before applying
Preparing documents early makes the whole process cleaner. Missing payslips, unexplained deposit entries, inconsistent expenses or incomplete identification can slow down approval and create unnecessary delays. In a competitive market, that kind of hold-up can cost you a property.
The exact list depends on your employment type, loan structure and lender. Start with these:
Common first home buyer mistakes
Most first home buyer problems are avoidable. They usually come down to doing the finance steps in the wrong order, or making assumptions about what a scheme or calculator result actually means in practice.
Shopping before checking borrowing capacity
Scrolling listings feels productive, but it can waste months if your realistic price range does not match what a lender will actually approve. Worse, the emotional investment of inspecting properties in the wrong bracket makes it much harder to recalibrate when reality hits.
Get borrowing capacity formally assessed before viewing properties.
Forgetting non-deposit buying costs
A buyer may technically have the deposit percentage but not enough total cash to settle. Stamp duty, legal fees, inspection costs and insurance all come from the same savings. That $70,000 deposit is actually $70,000 minus everything else.
Always budget total upfront cash, not just deposit percentage.
Assuming a scheme means loan approval
A scheme may reduce the deposit you need. It does not force the lender to say yes. Serviceability, credit history, property type and income all need to stack up independently. Qualifying for the HGS and getting a loan approved are two completely different tests.
Treat scheme eligibility and loan approval as two separate checks.
Bidding at auction without a finance plan
Auction contracts become unconditional at the fall of the hammer. There is no finance condition to protect you and no cooling-off period. If you win and cannot settle, the consequences are serious. Pre-approval before auction day is essential, and have your conveyancer review the contract before you bid.
Get pre-approved and contract-reviewed before registering to bid.
Relying only on online calculators
Calculators are useful for rough direction, not for approval planning. They do not apply lender-specific rules, assess credit conduct, factor in all expenses or check whether a lender will accept the property. Think of them as a starting point, not an answer.
Use calculators for direction. Confirm with a specialist.
Not checking the property against lender requirements
Small apartments (often under 40 to 50 sqm internally), high-density buildings, unusual titles, off-the-plan contracts and some regional properties can trigger lender restrictions that have nothing to do with your financial position. You can be financially approved and still get knocked back because of the property.
The property has to be approved too, not just you.
Common first home buyer scenarios
Strong income, small deposit
You may qualify for the Home Guarantee Scheme if you meet eligibility and can find a participating lender. The lender still needs to assess serviceability in full. At a high LVR, some lenders apply more conservative criteria even with scheme backing. Your genuine savings pattern over the past three to six months matters too. A recent lump-sum deposit without an underlying savings history can raise questions.
Good deposit, casual income
Casual income is treated differently by different lenders. Some require 12 months of consistent casual employment with the same employer. Others may accept less with strong documentation and regular hours shown across bank statements and payslips. If your hours vary or you work across multiple employers, the way a lender assesses your income may be more conservative. In this situation, lender choice matters more than usual.
Buying a unit or apartment
Many lenders set minimum internal floor area requirements, often 40 to 50 square metres net. High-density buildings in certain postcodes and buildings with a high proportion of investor-held units can also trigger restrictions. Before making any offer, regardless of how attractive the price looks, check the strata records and owners corporation reports for defect claims, special levies or pending litigation.
Buying at auction
If you win at auction, the contract is unconditional. There is no cooling-off period and no finance condition to fall back on. The deposit, typically 10% of the purchase price, is payable on the day. Get finance pre-assessed, have the contract reviewed by your conveyancer before auction day, set a firm ceiling with your broker and know your absolute maximum before you register to bid.
When should a first home buyer get finance help?
The short answer: early. The right time to talk to a finance specialist is before you start competing for properties, not after you have fallen in love with one. Getting finance help makes particular sense if any of these apply to your situation:
If any of these apply, a finance specialist can assess your position, identify the right pathway and help you avoid costly assumptions before you are locked into a contract.
