First Home Buyers Published by Snap That Loan | 2025

The First Home Buyer's Complete Guide to Getting Loan-Ready

Buying your first home is exciting — but the finance side of things can feel overwhelming. This guide walks you through everything you need to do (and know) before you apply for your first home loan.

Step 1: Understand Your Borrowing Capacity

Before you fall in love with a property, it's important to understand how much you can realistically borrow. Lenders assess your borrowing capacity based on a number of factors:

  • Your income (salary, rental income, business income)
  • Your existing debts and liabilities (credit cards, car loans, HECS)
  • Your living expenses
  • The size of your deposit
  • Your credit history
💡 Quick Tip Lenders use a "stress test" interest rate (usually 3% above the actual rate) to make sure you could still afford repayments if rates rise. This is why your actual borrowing capacity is often less than a simple income multiple would suggest.

Step 2: Build Your Deposit

Most lenders require a minimum 5–20% deposit. Here's what you need to know:

The 5% Deposit Option

With the First Home Guarantee Scheme, eligible buyers can purchase with just a 5% deposit without paying Lenders Mortgage Insurance (LMI). Places are limited each financial year, so it's important to act early and check your eligibility.

The 20% Deposit Advantage

If you can save 20% of the purchase price, you avoid LMI entirely (which can save you thousands), gain access to a wider range of lenders and products, and demonstrate strong financial discipline to lenders.

Other Ways to Boost Your Deposit

  • First Home Super Saver Scheme (FHSS) — save through super for tax advantages
  • Gifts from family — some lenders accept gifted funds (with a statutory declaration)
  • Guarantor loans — a parent or family member guarantees part of the loan using their own property

Step 3: Get Your Credit in Shape

Your credit score is one of the first things lenders look at. Here's how to make sure yours is working in your favour:

  • Check your credit report for errors (you can get a free copy from Equifax, Illion, or Experian)
  • Pay all bills and loan repayments on time
  • Reduce your credit card limits — even if you don't use them, limits count against you
  • Avoid applying for new credit in the 3–6 months before applying for a home loan
  • Close any credit cards or BNPL accounts you don't need

Step 4: Demonstrate Genuine Savings

Lenders want to see that your deposit didn't just fall in your lap. They look for evidence of consistent saving over at least 3–6 months, regular income deposits into your account, and no unexplained large deposits.

💡 What are "genuine savings"? Genuine savings are funds you've accumulated yourself over time — typically at least 5% of the purchase price held in your name for 3+ months. Some lenders treat rental history as evidence of savings capacity.

Step 5: Reduce Unsecured Debt

Outstanding personal loans, credit card balances, and Buy Now Pay Later balances all reduce your borrowing capacity. Before applying for your home loan:

  • Pay down or pay off credit card balances
  • Close BNPL accounts (Afterpay, Zip, etc.) — they show up on your credit file
  • Pay off or reduce personal loan balances
  • Reduce credit card limits even if you have no outstanding balance

Step 6: Prepare Your Documents

Getting your paperwork ready in advance saves time and stress when you're ready to apply. You'll typically need:

  • Proof of identity (passport or driver's licence)
  • Last 2–3 payslips
  • Last 2 years of tax returns and notices of assessment (especially if self-employed)
  • Last 3–6 months of bank statements (all accounts)
  • Evidence of your deposit / savings
  • Details of any existing loans or debts

Step 7: Check Your Government Grants & Schemes

As a first home buyer, you may be eligible for several government initiatives that can save you thousands:

  • First Home Guarantee Scheme — buy with 5% deposit, no LMI
  • First Home Owner Grant (FHOG) — up to $30,000 cash grant (state-specific)
  • Stamp Duty Concessions — full or partial exemption depending on your state and property value
  • First Home Super Saver Scheme (FHSS) — tax-effective saving through super

Ready to Take the Next Step?

We'll assess your situation, check your eligibility for government schemes, and map out the best path to your first home — for free.

Book a Free First Home Buyer Consultation

The Bottom Line

Getting loan-ready doesn't happen overnight, but with the right preparation, you can put yourself in the strongest possible position when the time comes to apply. The steps above — saving consistently, managing your credit, reducing debt, and getting your documents in order — will make a significant difference to the result you get.

And remember: you don't have to navigate this alone. A good finance broker can help you understand exactly where you stand, which lenders are right for your situation, and what government grants you might be entitled to — all at no cost to you.