Common Mistakes First Home Buyers Make & How to Avoid Them

Skipping Pre-Approval Before You Start Looking

Pre-approval gives you a clear budget before you attend a single inspection, and it signals to agents and vendors that you can settle. Without it, you are guessing at what you can afford and risking disappointment when a property you love turns out to be out of reach.

In our experience, buyers who lock in pre-approval before they start their search are in a position to move quickly when they find the right property. Consider a buyer who found a townhouse in Geelong they wanted to make an offer on, only to discover their borrowing capacity was $80,000 lower than expected due to existing personal loan repayments and buy-now-pay-later accounts they had forgotten about. By the time they worked through the numbers with a broker, the property had sold. If they had sorted pre-approval first, they would have known their actual budget, cleared the small debts beforehand, and been ready to act.

Not Understanding What You Can Actually Borrow

Your borrowing capacity is not the same as what the bank will approve you for. Lenders assess your income, expenses, and debts using strict serviceability tests, and what you qualify for might fall short of what you think you can afford.

Buyers regularly overestimate their budget by $50,000 to $100,000 because they do not account for how lenders treat living expenses, childcare costs, or investment property debts. A buyer with a gross income of $90,000 might assume they can borrow close to six times their salary, but once a lender adds buffers for interest rate rises and factors in actual living costs, the approved amount can drop significantly. Running your numbers through a broker before you start looking removes that guesswork and lets you focus on properties that actually fit your financial position.

Ignoring the Full Cost of Buying a Property

The deposit is only part of what you need upfront. Stamp duty, conveyancing, building and pest inspections, loan establishment fees, and Lenders Mortgage Insurance if you are borrowing above 80% can add tens of thousands to the amount you need at settlement.

In Victoria, first home buyer stamp duty concessions mean you pay no duty on properties up to $600,000, and reduced duty up to $750,000 if eligible. If you are buying outside those thresholds, or in regional areas where the median is lower, you still need to budget for the balance. A buyer purchasing in Ballarat at $550,000 might pay no stamp duty but still needs to cover conveyancing, inspection reports, and LMI if borrowing with a 10% deposit. That can mean another $15,000 to $20,000 on top of the deposit itself.

Choosing a Loan Based on Rate Alone

A low advertised interest rate does not always mean the loan will cost you less over time. Application fees, ongoing account fees, the presence or absence of an offset account, and how easily you can make extra repayments all affect the total cost of the loan.

A fixed interest rate might look appealing in a rising rate environment, but if you lock in for three years and circumstances change, you could face break costs if you want to refinance or sell. A variable interest rate with an offset account gives you flexibility to park savings and reduce interest without locking funds away. Some lenders also offer interest rate discounts for specific professions or larger deposits, which can make a material difference over the life of the loan. Your choice should reflect how you plan to use the loan, not just the headline rate.

Missing Out on Government Grants and Concessions

Victoria offers a $10,000 First Home Owner Grant for new homes valued up to $750,000, and stamp duty concessions that can save you thousands on both new and established properties. The federal First Home Guarantee allows eligible buyers to purchase with a 5% deposit without paying Lenders Mortgage Insurance, which can reduce upfront costs by $10,000 to $30,000 depending on the property price.

These schemes can be stacked, but only if you meet the eligibility criteria and apply correctly. Some buyers assume they do not qualify because they earn over a certain threshold, but as of late 2025, the First Home Guarantee removed income caps entirely. Others miss the deadline to apply for state grants because they did not know the application had to be lodged within a specific window after settlement. A mortgage broker who works with first home buyers regularly will know which schemes you qualify for and ensure the timing is right.

Borrowing at Your Maximum Capacity

Just because a lender will approve you for a certain amount does not mean you should borrow the full sum. If you stretch to your limit, you leave no buffer for rate rises, unexpected repairs, or changes in income.

Consider a buyer approved for $650,000 who chooses to borrow $600,000 instead, leaving $50,000 of headroom. When variable rates rose over an 18-month period, their repayments increased by around $400 a month, but they had built enough margin into their budget that they did not need to dip into savings or cut essentials. Another buyer who borrowed the full $650,000 on the same income found themselves under pressure within six months and had to look at refinancing to a longer term just to manage repayments. Borrowing within your comfort zone, not at your ceiling, gives you room to absorb change without financial stress.

Not Comparing Lenders or Using a Broker

Every lender has different serviceability rules, different appetite for certain types of income, and different pricing depending on deposit size and loan type. Applying directly to one bank might get you an approval, but it might not be the most suitable loan for your situation.

A broker compares home loan options across multiple lenders, identifies which ones will treat your income favourably, and structures the application to give you the outcome that suits your goals. Some lenders will accept rental income from a partner still living overseas, others will not. Some will lend on a property with a bushfire risk, others will decline. If you apply to the wrong lender first and get declined, that decline sits on your credit file and can make subsequent applications harder. A broker removes that risk by matching you to the right lender from the start.

Overlooking Loan Features That Matter Later

An offset account, the ability to make extra repayments without penalty, redraw access, and portability if you move house are all features that can save you money or give you flexibility down the line. Many first home buyers focus only on the rate and approval, then find out months later that their loan does not let them do what they need.

If you are likely to receive bonuses, tax returns, or irregular income that you want to put toward the loan, a variable rate loan with full offset and unlimited extra repayments is worth considering. If you value certainty and want to lock in your repayments for a set period, a fixed interest rate might suit, but you should know the restrictions that come with it. The right structure depends on how you earn, how you save, and how long you plan to hold the property.

Buying your first home involves more moving parts than most people expect, and the cost of a misstep can be significant. Working with a broker who understands first home buyer eligibility, government schemes, and lender policy means you start with a clear picture of what you can afford, which loans suit your situation, and what support you qualify for. Call one of our team or book an appointment at a time that works for you.

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