Buying your first home is one of the biggest financial decisions you'll make, and the Australian property market can feel overwhelming if you don't know where to start. This guide walks through the process in the order most first home buyers actually experience it — from getting your finances in order through to settlement day.
Step 1: Understand your borrowing power
Before you start inspecting properties, it helps to have a realistic picture of what you can actually borrow. Lenders assess your income, expenses, existing debts, and the size of your deposit to work out how much they're willing to lend. This isn't just about affordability on paper — it's about understanding a monthly repayment you'll be comfortable with for years to come.
Step 2: Save your deposit
Most lenders like to see a deposit of at least 5–20% of the purchase price, with larger deposits generally leading to more favourable loan terms and no Lenders Mortgage Insurance (LMI) once you reach 20%. Below that threshold, LMI is usually required, which is a cost worth factoring into your budget from the start.
Step 3: Get pre-approved
Pre-approval (sometimes called conditional approval) gives you an indication of how much a lender is prepared to lend you, subject to final checks. It's not a guarantee of finance, but it gives you the confidence to make offers and negotiate, knowing your budget is grounded in a lender's actual assessment rather than a rough estimate.
Step 4: Find the right property and loan structure
Every buyer's situation is different — some prioritise a lower rate, others value flexibility like offset accounts or the ability to make extra repayments. A mortgage broker's role is to compare options across multiple lenders against your specific circumstances, rather than you having to do that research loan by loan.
Step 5: Formal approval and settlement
Once you have a signed contract, your lender will move to formal (unconditional) approval, which typically involves a valuation of the property. From there, your solicitor or conveyancer coordinates settlement with the seller's representative, and the property legally becomes yours.
Common mistakes first home buyers make
- Shopping for properties before understanding borrowing power
- Underestimating additional costs like stamp duty, legal fees, and moving costs
- Not comparing loan features beyond the headline rate
- Leaving pre-approval until after finding a property
Every buyer's circumstances are different, and this guide is general information rather than personal financial advice. Speaking with a mortgage broker early in the process can help you understand which steps matter most for your situation.
VIP Finance operates as a Credit Representative (Number 565614) and holds ABN 59 323 956 021.
The information on this page is general in nature and doesn’t take into account your personal financial situation or objectives. It isn’t personal financial advice, and you should consider whether it’s appropriate for your circumstances before acting on it. Loan approval is always subject to the lender’s own credit assessment criteria.
