10 Must-Know Tips for First Home Buyers in Australia

Buying your first home is one of the biggest financial decisions you'll ever make. It's exciting, it's nerve-wracking, and — if you're being honest — it can feel like everyone else got the instruction manual and you didn't.

There's a lot to take in: deposits, borrowing power, stamp duty, government grants, loan types, pre-approval, settlement… the list goes on. The good news is that once you understand the key pieces, the process starts to make sense. This guide breaks down the 10 most important things to understand before you start searching, before you apply for a home loan, and before you sign on the dotted line.

Think of this as your essential first-home buyer crash course — covering everything from how much you can borrow to what happens on settlement day. Use the links throughout to dive deeper into any area where you want more detail.

1. Know Your Borrowing Capacity Before You Fall in Love With a Property

There's nothing worse than seeing the house of your dreams and instantly falling in love with it... only to then find out that you can't actually afford it! Those months spending looking at $800,000 properties, when you're borrowing capacity is only $650,000 is time you will never get back. So, before you even start looking and attending open homes, get a realistic picture of what you can actually borrow.

Your borrowing capacity (sometimes called serviceability) is determined by your income, regular expenses, existing debts, and number of dependants. Lenders don't just assess what you can afford today — they apply a serviceability buffer, which is typically 3% above the actual loan rate. This buffer, mandated by APRA, is designed to check you could still manage repayments if interest rates rose.

There are ways to increase your borrowing capacity though. Reducing your credit card limits, paying off personal loans, and keeping your living expenses lean for a number of months before you apply can all improve it meaningfully.

You can easily use MoneyMart's home loan calculator for a quick estimate of how much you could borrow and what your repayments might look like at current rates. It's a useful starting point before you speak to a lender or broker.

2. Your Deposit Size Affects More Than You Think

Most first home buyers know they need a deposit. Fewer realise that the size of that deposit has a significant ripple effect on their costs. Two items that are definitley affected by your deposit size are:

Loan-to-Value Ratio (LVR)
This is the percentage of the property value you're borrowing. If you're buying a $700,000 home with an $80,000 deposit, your LVR is 88.6%. The higher your LVR, typically the higher your interest rates are. So anything you can do to lower this value is going to give you cost savings in the long run.

Lenders Mortgage Insurance (LMI)
When LVR values are high, LMI kicks in as well. Typically when deposits are less than 20% of the purchase price — So other words, when your LVR exceeds 80%. LMI protects the lender against the risk of you defaulting, and it's a cost paid by you. Depending on your loan size and LVR, it can add thousands to your upfront costs. For some banks and lenders, this is a mandatory requirement if you want to get a home loan with them.

Example: On a $700,000 property with a 10% deposit ($70,000), LMI could cost between $12,000 and $22,000 depending on your lender. With a 20% deposit ($140,000), LMI disappears entirely — and you'll typically qualify for better interest rates too.

Saving a larger deposit takes longer, but the LMI saving — combined with lower ongoing interest costs — often makes it worth it. That said, as a first home buyer, there are government schemes can help you buy with as little as 5% without paying LMI (see tip #4).

3. Budget for All the Upfront Costs — Not Just the Deposit

Here's something that catches a lot of first home buyers off guard: the deposit is just one of many costs you'll face on the way to settlement. You'll need to budget for all of these on top of your deposit:

Stamp duty (transfer duty): A state government tax on property purchases. The amount varies significantly by state and territory and is often the largest additional cost after the deposit. Some first home buyers qualify for concessions or full exemptions. Use MoneyMart's stamp duty calculator to check your state, or read our full stamp duty guide for a state-by-state breakdown.
Conveyancing fees: A licensed conveyancer or solicitor handles the legal transfer of ownership. Fees typically range from $800 to $2,500.
Building and pest inspection: A qualified inspector can identify structural issues or pest damage before you're legally committed. Don't skip this — budget $300–$700.
Loan establishment fees: Some lenders charge $300–$600 when you take out a loan, though many waive this for first home buyers.
Moving costs: Easy to overlook, but removalists for a home move typically cost $800–$2,500 depending on distance and volume.

In total, costs beyond your deposit can easily reach $20,000–$40,000 depending on your state and property price. Factor this into your savings target from day one.

4. Government Grants and Schemes: The Head Start You Need to Know About!

Australia has several programs designed specifically to help first home buyers get into the market sooner. Understanding what's available — and whether you qualify — should be one of your first steps.

First Home Guarantee (formerly the FHLDS): Lets eligible buyers purchase with a deposit as low as 5%, with the federal government guaranteeing the remaining portion. This means you avoid LMI entirely on a low deposit. Annual places are limited and fill quickly.

First Home Super Saver Scheme (FHSS): Lets you make voluntary contributions into your superannuation and withdraw up to $50,000 for a home deposit. The tax treatment makes this a genuinely efficient savings vehicle for many buyers.

State and territory First Home Owner Grants and Concessions: Most states offer a concession for stamp duty costs, or remove the amount owed entirely, for first home buyers. In New South Wales for example, if you're home costs under $750,000 then you won't have any stamp duty to pay (as of 2026).

Amounts and thresholds do vary by state and territory so it's worth checking out our dedicated guide to first home buyer grants and schemes for everything currently available where you live.

5. Variable, Fixed, or Split? Your Loan Type Matters More Than You Think

Not all home loans are created equal — and the type you choose affects your repayments, your flexibility, and your total interest costs over the life of the loan.

Variable rate home loans move up and down in line with market interest rates. When the RBA cuts rates, your repayments typically drop. When rates rise, they increase. Variable loans generally offer more flexibility: you can usually make extra repayments, access a redraw facility, and attach an offset account to reduce the interest you pay.

Fixed rate home loans lock your interest rate for a set period — usually one to five years. Your repayments stay the same regardless of what the RBA does, which is useful for budgeting certainty. The trade-off is less flexibility: extra repayments may be capped, and breaking the loan early can trigger significant break costs.

Split loans divide your borrowing between a fixed and variable portion, giving you a blend of certainty and flexibility.

There's no universal "best" option — it depends on your financial situation, risk appetite, and what the rate market looks like. Read our guide to fixed, variable, and split home loans for a deeper comparison, and compare current home loan rates on MoneyMart to see where lenders are sitting right now.

6. Your Credit Score Is Your Financial Reputation — Start Building It Now

Your credit score is a number between 0 and 1,200 (on Australia's Equifax scale) that lenders use to assess how reliably you manage credit. A higher score makes it easier to get approved and can help you access better interest rates.

Common factors that damage your credit score include missed or late payments, multiple credit applications within a short period, high credit card limits (even if you don't use them), and defaults or payment arrangements.

The good news: your score is improvable. Paying every bill on time, reducing credit card limits before applying for a home loan, and avoiding new credit applications in the 6–12 months before you apply can all make a meaningful difference.

You can check your score for free through Equifax, Experian, or illion. Do this early — ideally at least six months before you plan to apply for pre-approval — so you have time to address any issues before a lender sees your file.

7. Pre-Approval Is Not a Guarantee — But It Is a Competitive Advantage

Many first home buyers treat pre-approval as a guarantee of finance. It isn't — but it's still worth getting before you start making serious offers.

Pre-approval (also called conditional approval or approval in principle) means a lender has assessed your financial situation and is, in principle, prepared to lend you up to a specified amount. It's conditional on the property you buy meeting the lender's criteria and your financial situation remaining stable.

Pre-approval is typically valid for 90 days. Having it before you make an offer gives you a clearer budget ceiling, signals to real estate agents and vendors that you're a serious buyer, and speeds up the formal approval process once your offer is accepted.

Just don't treat it as a blank cheque. Lenders can — and do — decline formal loans if your circumstances change between pre-approval and settlement. Avoid taking on new debt, changing jobs, or making large purchases during this period.

8. The Buying Process Has More Steps Than Most People Think

Settlement day doesn't arrive immediately after your offer is accepted. There's a structured process between making an offer and getting the keys — and understanding it upfront removes a lot of stress.

Here's a simplified version of what to expect:

Search and inspect — Attend open homes, shortlist properties, and arrange building and pest inspections on any property you're serious about.
Make an offer or bid at auction — Private sale offers are negotiable. Auctions are unconditional: if you're the successful bidder, you're legally committed on the day.
Pay your initial deposit — Typically 10% of the purchase price, paid on exchange of contracts.
Exchange contracts — Both parties sign the contract. In most states, private sale buyers have a cooling-off period of 2–5 business days to withdraw (penalties may apply). There's no cooling-off period at auction.
Formal loan approval — Your lender orders a property valuation and issues formal approval.
Settlement — Usually 30–90 days after exchange of contracts. Ownership legally transfers, and you receive the keys.

The application process guide in our home loan series covers this in more depth if you want a detailed walkthrough of each stage.

9. Don't Just Budget for the Mortgage — Budget for Everything That Comes After

A lot of first home buyers pour all their financial planning into getting through the front door. The ongoing costs of ownership can still come as a shock.

On top of your mortgage repayments, budget for:

Council rates: $1,000–$3,500+ per year depending on the property and local council.
Strata levies (apartments and townhouses): If the property is within a strata scheme, expect quarterly levies ranging from $500 to $3,000+ per quarter, covering building insurance, maintenance, and management.
Home and contents insurance: $1,200–$3,500+ per year depending on location, build type, and level of cover.
Maintenance and repairs: A widely used rule of thumb is 1% of the property's value per year. On a $700,000 home, that's $7,000 annually — and older properties often cost more.
Utilities: Water, electricity, gas, and internet costs that may be higher than in a rental property.

Building these into your monthly budget before you buy means you won't be caught short once you've moved in. When comparing home loans, also look at features like offset accounts and redraw facilities — they let you park savings against your loan balance, reducing interest while keeping funds accessible for these kinds of costs.

10. A Good Mortgage Broker Can Save You Both Time and Money

You don't have to navigate the home loan market alone. Mortgage brokers are licensed professionals who assess your financial situation, compare loan products across a panel of lenders, and handle the application paperwork. They're paid a commission by the lender, not directly by you.

Under Australian law, mortgage brokers are required to act in your best interests — they can't simply recommend the product that earns them the biggest commission. This obligation is enforced by ASIC under the National Consumer Credit Protection Act.

A broker is especially valuable if your situation is complex: you're self-employed, you've recently changed jobs, you have an imperfect credit history, or you're using a government scheme like the First Home Guarantee. Many brokers also have access to lender products that aren't available directly to consumers.

If you'd prefer to compare your options yourself first, MoneyMart's home loan comparison lets you filter and compare rates and features across a wide range of Australian lenders — a good starting point whether you ultimately use a broker or go direct.

Next Steps

We've just covered the 10 most important things every Australian first home buyer should know before they start. Getting across these fundamentals puts you well ahead of most people when they enter the market — and means far fewer surprises along the way.

Key Takeaways

Know your borrowing capacity before you start searching — it sets your realistic price range.
A deposit below 20% triggers LMI, which can add $10,000–$20,000+ to your costs. Government schemes can help you avoid it.
Upfront costs beyond the deposit can reach $20,000–$40,000 — budget for all of them, including stamp duty, conveyancing, and inspections.
Government grants and schemes — including the First Home Guarantee and FHSS — are worth exploring before you dismiss them.
Pre-approval speeds up the buying process and strengthens your offer, but it's not a guarantee of final approval.
Ongoing ownership costs (council rates, insurance, maintenance) can add $10,000+ per year — factor these into your budget from the start.

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Disclaimer: This information is general in nature and does not consider your personal circumstances. Consider seeking professional financial advice before making any decisions.

10 Things You Should Know Before Buying Your First Home