Buying a first home is mostly a finance problem wearing a property costume. The search gets the attention, but almost everything that determines whether it works — what you can spend, how fast you can move, whether your offer holds up — is settled before you walk into an inspection.

Here is what actually matters, in the order it matters.

The deposit, and the 20% question

Twenty per cent of the purchase price is the number everyone aims at, and the reason is Lenders Mortgage Insurance rather than anything magic about the figure itself. At 20% equity or more, most lenders will not require LMI. Below it, most will.

You do not have to reach 20%. A great many first home buyers do not, and buying sooner with a smaller deposit has often worked out better than saving longer while prices moved. The point is that it should be a decision with the cost quantified, not a surprise late in the process.

Genuine savings

Many lenders want to see part of your deposit as "genuine savings" — money you accumulated yourself over a period, rather than a lump sum that appeared recently. It demonstrates you can set money aside consistently, which is really what they are testing.

Gifts and inheritances are usually acceptable, but they may be treated differently, and a gift generally needs to be documented as a gift rather than a loan. If your deposit is coming from family, mention it early — it changes which lenders suit.

Lenders Mortgage Insurance, explained properly

LMI is a one-off insurance premium that protects the lender if you default and the property sells for less than the outstanding loan. It does not protect you, despite being paid by you. That surprises a lot of first home buyers.

Two things worth knowing. The premium rises steeply as the deposit shrinks — the difference between a 10% and a 5% deposit is more than proportional. And it can usually be capitalised, meaning added to the loan rather than paid upfront, which helps cash flow while increasing what you borrow.

LMI is also not portable. If you refinance to another lender later while still below the equity threshold, you can end up paying it a second time — one reason our refinancing guide treats it as a first check rather than an afterthought.

Guarantor loans

A family guarantee lets a parent or close family member use equity in their own property as additional security, which can remove the need for LMI and let you buy with a smaller deposit.

It is a genuine commitment on their part, not a formality — their property is security for a portion of your loan, and it affects their own borrowing position while the guarantee is in place. Most guarantees can be released once you have built enough equity. Anyone considering it should get their own advice, and the conversation is better had early than sprung at signing.

Government schemes

There are federal and state programs aimed at first home buyers — deposit guarantee schemes, stamp duty concessions and exemptions, and grants in some circumstances.

We have deliberately not listed thresholds here, because they are reviewed regularly, they differ by state, and eligibility caps on price and income move. Anything specific written today would be wrong soon enough to mislead someone. Check the current criteria at the time you are buying — and tell us what you are considering, because scheme eligibility interacts with lender choice in ways that are not always obvious.

The costs beyond the deposit

The deposit is the big one, not the only one. Budget for:

  • Stamp duty, on a published state scale that rises faster than the price. First home buyer concessions may reduce or remove it — worth checking against current thresholds.
  • Legal or conveyancing fees for contract review and settlement.
  • Building and pest inspections, plus a strata report if you are buying a unit. Money well spent even when the answer is good.
  • Loan fees — application, valuation and settlement, though these are often waived.
  • Moving, connections and the immediate essentials, which reliably cost more than expected.

Keep a buffer beyond the minimum. Arriving at settlement with nothing left over is a fragile way to start, and lenders increasingly look at what remains afterwards.

Borrowing capacity, and why the number surprises people

Your borrowing capacity is assessed rather than calculated from your salary. Lenders test you against a rate meaningfully higher than the one you would pay, assess living expenses against a benchmark, and count credit card limits rather than balances.

That last one is the quickest win available to most first home buyers: reducing or closing unused card limits before you apply can lift capacity immediately. Our borrowing capacity guide goes through the rest.

Pre-approval — and the kind that counts

There are two things called pre-approval. One is an instant online estimate based on what you typed in. The other is an assessed pre-approval, where a lender has actually reviewed your documents and credit position.

Only the second is worth acting on. At auction there is no cooling-off period and no finance clause — the contract is binding on the fall of the hammer. Bidding without properly assessed finance is a genuine risk, not a technicality.

The mistakes we see most

  • Opening new credit during the process. A car loan or a buy-now-pay-later account between pre-approval and settlement can undo the approval.
  • Changing jobs mid-application. Sometimes unavoidable, but probation periods matter to lenders. Tell your broker before, not after.
  • Treating pre-approval as a guarantee. It is conditional, it expires, and the property still has to value up.
  • Forgetting the property gets assessed too. The lender values what you are buying, and a valuation below the contract price is your problem to cover.
  • Budgeting to the absolute limit. The maximum you can borrow and the amount you should is rarely the same figure.

A sensible sequence

Get your borrowing capacity assessed properly. Work out the deposit and full costs at your target price. Sort an assessed pre-approval. Then start looking, knowing your real ceiling and able to act when the right place appears.

Done in that order, the finance stops being the stressful part.

Talk to a Sabea broker about your first purchase, or read more about first home loans.

General information only. It does not take your objectives, financial situation or needs into account, and it is not credit or financial advice. Lender policy, rates and eligibility change regularly and vary between lenders — talk to us about your own circumstances before acting on anything here.