First Home Loans
Buying a first home is mostly a finance problem wearing a property costume. Almost everything that decides whether it works is settled before you walk into an inspection.
Get the Finance Right and the Rest Gets Easier
The property search gets the attention. What actually determines your outcome — what you can spend, how fast you can move, whether your offer stands up — is decided by the finance, and decided early.
We work through it in the order it matters, so you are not discovering a constraint the week you find a place you want.
- What you can genuinely borrow, assessed rather than estimated
- The deposit you need, and what Lenders Mortgage Insurance would cost below it
- Whether a family guarantee is worth considering, and what it commits your family to
- Which government schemes you may be eligible for at the time you buy
- The costs beyond the deposit that people routinely underestimate
- An assessed pre-approval before you start bidding, not after
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The 20% Question
Twenty per cent is the number everyone aims at, and the reason is Lenders Mortgage Insurance rather than anything inherently important about the figure. At or above that level of equity, most lenders do not require it. Below it, most do.
You do not have to reach 20%. Plenty of first home buyers do not, and buying sooner with a smaller deposit has often worked out better than saving longer. The point is that it should be a decision with the cost quantified, not a surprise late in the process.
- LMI protects the lender, not you, despite being paid by you. That surprises most people the first time they hear it.
- The premium rises steeply as the deposit shrinks — the step between a 10% and a 5% deposit is more than proportional.
- It can usually be capitalised, meaning added to the loan rather than paid upfront, which helps cash flow and increases what you owe.
- It is not portable. Refinancing later while still below the threshold can mean paying it a second time.
- Genuine savings — many lenders want to see part of the deposit accumulated by you over time rather than appearing recently.
Gifts and inheritances are usually acceptable but may be treated differently, and a gift generally needs documenting as a gift rather than a loan. If family money is involved, say so early — it changes which lenders suit.
A Real Commitment, Not a Formality
A family guarantee lets a parent or close relative use equity in their own property as additional security. It can remove the need for LMI and let you buy with a smaller deposit.
It is also a genuine obligation. Their property secures a portion of your loan, and it affects their own borrowing position for as long as the guarantee is in place. Most guarantees can be released once you have built enough equity.
- The guarantee is usually limited to a defined portion, not the whole loan
- Your guarantor should get their own legal and financial advice
- Release typically depends on your equity, which depends on a valuation
- It changes which lenders are suitable, so it is worth raising at the start
The conversation is much better had early than sprung on a family member at signing. If it is even a possibility, tell us and we will map what it would involve for both sides.
The Kind That Actually Counts
Two different things are called pre-approval. One is an instant online estimate generated from what you typed in. The other is an assessed pre-approval, where a lender has reviewed your documents and your credit position.
Only the second is worth acting on. At auction there is no cooling-off period and no finance clause — the contract binds on the fall of the hammer. Bidding without properly assessed finance is a real risk, not a technicality.
- It is conditional, and it expires — usually after a few months
- The property still has to value up; a shortfall is yours to cover
- Opening new credit after pre-approval can undo it
- Changing jobs mid-process matters, particularly onto probation
Tell us before any of those happen rather than after. Almost all of them are manageable with notice and awkward without it.
The Process, Step by Step
- Borrowing capacityAssessed properly, so the number you plan around is real rather than an online estimate.
- Deposit and cost planThe deposit, LMI if it applies, stamp duty and the costs beyond, at your target price.
- Assessed pre-approvalA lender reviews your documents and credit position, so you can bid with confidence.
- Search and offerYou look, knowing your genuine ceiling and able to move when the right place appears.
- Application to settlementFull application, valuation, unconditional approval and settlement, managed throughout.
What to have ready
- Recent payslips and an employment contract or letter
- Three to six months of bank statements showing savings
- Statements for any credit cards, personal loans or car finance
- Photo identification
- Evidence of any gift or family contribution toward the deposit
Not all of it is needed on day one. We will tell you what matters first so you are not gathering paperwork you do not need yet.
Common Questions
How much deposit do I actually need to buy a first home?
Below 20% equity most lenders require Lenders Mortgage Insurance, which is why that figure is the common target. Many first home buyers proceed with less and capitalise the premium into the loan. The right answer depends on the LMI cost at your deposit level, whether a guarantee is available, and whether waiting to save more genuinely leaves you better off.
What is Lenders Mortgage Insurance and do I have to pay it?
LMI is a one-off insurance premium that protects the lender if you default and the property sells for less than the loan outstanding. It does not protect you. It generally applies below a certain equity threshold, and it can often be avoided with a larger deposit or a family guarantee.
What are genuine savings?
Money you accumulated yourself over a period, rather than a lump sum that appeared recently. Many lenders want to see part of the deposit in that form because it demonstrates you can set money aside consistently. Gifts are usually acceptable but may be treated differently, and generally need to be documented as a gift.
How does a guarantor loan work?
A family member uses equity in their property as additional security for a defined portion of your loan, which can remove the need for LMI. It is a genuine commitment that affects their own borrowing position, and it can usually be released once you have built sufficient equity. Anyone considering it should take their own advice.
What government schemes are available to first home buyers?
There are federal and state programs including deposit guarantee schemes, stamp duty concessions and grants in some circumstances. We have deliberately not listed thresholds here because they are reviewed regularly, differ by state and change. Check the current criteria when you buy, and tell us what you are considering — eligibility interacts with lender choice in ways that are not always obvious.
What costs should I budget for beyond the deposit?
Stamp duty on a published state scale, legal or conveyancing fees, building and pest inspections plus a strata report for a unit, loan fees where they are not waived, and moving and connection costs. Keep a buffer beyond the minimum — lenders increasingly look at what remains after settlement.
Guides on This Topic
- The first home buyer's guide to getting finance right
- How much can I borrow? What lenders assess
- What you need to buy in Mosman, Manly or Chatswood
These go deeper than a service page reasonably can. All general information only — and none of it takes your particular circumstances into account.
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Learn more →First Home Loans Across the North Shore & Northern Beaches
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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 and eligibility change regularly and vary between lenders — talk to us about your own circumstances before acting on anything here. Sabea Financial, Credit Representative 539 662, ABN 86 653 823 253, is authorised under Australian Credit Licence 391237.