First Home Buyer Mistakes: The Dos and Don'ts

Borrowing at Maximum Capacity Without a Buffer

Borrowing the maximum amount a lender will approve leaves no room for rate rises or changes in your circumstances. A buyer looking at a townhouse in Bundoora might be approved for $650,000 based on their current income, but if rates increase by just 0.5%, monthly repayments could rise by several hundred dollars. Lenders assess your borrowing capacity at a higher buffer rate than the actual rate you will pay, but that buffer assumes you have no other changes to income or expenses.

Consider a buyer who borrowed $620,000 instead of the full $650,000 they qualified for. When their fixed rate ended and reverted to a higher variable rate, the smaller loan size meant they could absorb the increase without needing to cut essential spending or refinance under pressure. The difference in borrowing $30,000 less reduced their monthly repayment by around $180, which provided a workable margin when their circumstances changed.

Skipping Pre-Approval Before Attending Auctions

Attending auctions without pre-approval means you do not know what you can afford or whether a lender will support your purchase. Bundoora has a mix of older brick units near RMIT's campus and newer townhouses closer to the Plenty Road corridor, and auction competition can move quickly. Without pre-approval, you risk bidding beyond what a lender will actually lend you, or missing out because you could not act quickly enough.

Pre-approval also exposes issues with your application early, such as insufficient genuine savings, casual employment that needs additional documentation, or credit file errors that take weeks to resolve. Fixing these problems before you find a property means you can move to unconditional contract faster once your offer is accepted. In our experience, buyers who obtain pre-approval before they start looking are in a position to settle four to six weeks sooner than those who begin the loan application after signing a contract.

Assuming You Need a 20% Deposit to Buy

You do not need a 20% deposit to purchase your first home. The First Home Guarantee allows eligible buyers to purchase with a 5% deposit without paying Lenders Mortgage Insurance, and the scheme was expanded in late 2025 to remove income caps and place limits. A buyer purchasing in Bundoora with a 5% deposit can access the same interest rate as someone with a 20% deposit, provided they meet the lender's serviceability requirements.

Lenders Mortgage Insurance applies when your deposit is below 20%, but the First Home Guarantee removes that cost for eligible purchases. If you do not qualify for the Guarantee, LMI is added to your loan balance and repaid over the life of the loan. The cost varies depending on your deposit size and loan amount, but it allows you to enter the market sooner rather than waiting years to save a larger deposit while property values and rents continue to rise.

Not Claiming Stamp Duty Concessions You Are Entitled To

Victoria offers a full stamp duty exemption on properties up to $600,000 and a reduced rate on properties up to $750,000 for eligible first home buyers. On a property valued at $650,000, the concession could save you around $34,000. The concession applies to both established homes and new builds, provided you meet the eligibility criteria and intend to occupy the property as your principal place of residence.

You must apply for the concession at the time of settlement through your conveyancer or solicitor. If you miss the application window, you cannot claim it retrospectively. The concession is not automatic, and your lender will not apply it on your behalf. Confirming your eligibility early in the process and ensuring your conveyancer has the correct information prevents costly errors at settlement.

Choosing a Loan Based Only on the Interest Rate

The advertised interest rate does not tell you the full cost of a home loan. A loan with a lower rate might have higher fees, no offset account, or restrictions on extra repayments. A buyer in Bundoora comparing a 6.20% loan with a $395 annual fee and an offset account to a 6.10% loan with no offset and a $600 fee needs to calculate the actual cost difference over the time they expect to hold the loan.

An offset account linked to your home loan reduces the interest you pay by offsetting your salary and savings against the loan balance. If you keep $15,000 in an offset account on a $550,000 loan, you only pay interest on $535,000. Over a year, that saves you around $900 in interest at a 6% rate. A fixed interest rate provides repayment certainty but typically does not include an offset account and limits extra repayments to a capped amount per year. A variable interest rate allows unlimited extra repayments and full offset access, but your repayments will change when rates move.

Forgetting to Factor in Settlement and Ongoing Costs

The deposit is not the only upfront cost. Settlement costs include conveyancing fees, building and pest inspections, lender application fees, and government charges. For a property in Bundoora, budget for $8,000 to $12,000 in settlement costs depending on the property type and whether you are purchasing at auction or through private sale.

Ongoing costs include council rates, water rates, strata fees if applicable, building insurance, and loan account fees. A unit in one of the developments near Plenty Road might have quarterly strata fees of $800 to $1,200, which is an additional $3,200 to $4,800 per year on top of your mortgage repayment. These costs are not included in your lender's serviceability assessment, but they affect your actual cashflow once you settle.

Relying on Online Calculators for Final Borrowing Decisions

Online calculators provide estimates, but they do not account for your specific employment type, existing debts, credit history, or the lender's assessment of your living expenses. A buyer using an online calculator might see they can borrow $600,000, but a lender's actual assessment might reduce that to $540,000 once they include HECS debt, a car loan, and higher living expense benchmarks.

Lenders also assess rental income, overtime, and commission differently. One lender might include 80% of projected rental income when assessing an investment property purchase, while another includes 100% if you can show a signed lease. These differences mean the online estimate and the actual approved amount can vary by tens of thousands of dollars. An assessment from a mortgage broker gives you a realistic borrowing figure based on how lenders will actually assess your application.

Using Savings That Do Not Meet Genuine Savings Requirements

Most lenders require at least 5% of the purchase price to come from genuine savings, which means funds you have saved over a minimum of three months. Money received as a gift, a tax refund, or a bonus payment does not always meet this requirement unless it has been held in your account for the required period. A first home buyer in Bundoora applying with a 5% deposit under the First Home Guarantee still needs to show that the 5% was saved over time, not deposited last week.

Some lenders accept gifted deposits from immediate family, but the donor usually needs to sign a statutory declaration confirming the funds are a genuine gift and not a loan that must be repaid. If your deposit includes gifted funds, declare this upfront in your home loan application so the lender can assess it correctly. Attempting to reclassify a gift as savings by holding it in your account for a few months can result in your application being declined if the lender requests bank statements showing the source.

Overlooking the First Home Super Saver Scheme

The First Home Super Saver Scheme allows you to contribute up to $15,000 per financial year into your superannuation fund and withdraw up to $50,000 of contributions and earnings to use as a deposit. Contributions are taxed at 15% instead of your marginal tax rate, which means if you earn $85,000 per year, you save 22% in tax on those contributions compared to saving the same amount in a standard bank account.

You need to make voluntary concessional contributions through salary sacrifice or personal deductible contributions, and you must apply to the ATO to release the funds once you are ready to purchase. The scheme works particularly well for buyers who have stable employment and can afford to salary sacrifice over two or three financial years before buying. It does require planning, but the tax saving on a $50,000 contribution can be several thousand dollars compared to saving the same amount in an after-tax savings account.

Not Seeking Advice Until After You Sign a Contract

Waiting until after you have signed a contract to speak to a mortgage broker or lender creates unnecessary pressure and limits your options. If your application is declined or delayed, you risk losing your deposit or being forced to accept loan terms you would not have agreed to with more time. A buyer in Bundoora who signs a contract with a 30-day settlement and then discovers their employment type requires additional documentation might not have enough time to provide what the lender needs.

Speaking to a broker before you start looking means you know what you can afford, which loan options suit your situation, and what documentation you need to have ready. You also avoid wasting time looking at properties outside your budget or applying to lenders who will not support your purchase. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions