12 mistakes first home buyers make — and how to avoid every one

Money mistakes — made before you see a single listing

(And one step before all of this: if you're still deciding whether buying beats renting at all, the rent vs buy calculator shows your break-even year in two minutes.)

1. Treating the bank's maximum as your budget. The pre-approval says $650,000, so $650,000 quietly becomes the search filter. The Reserve Bank looked at how first home buyer loans actually perform and found they start with bigger loans relative to the home's value, and smaller savings left over, compared with other buyers. In plain terms: first-timers tend to buy at their limit and keep little in reserve. That's fine while everything goes to plan — and tight the moment anything doesn't.

The simple move: set your own ceiling below the bank's, so a rate rise or a surprise bill is an annoyance, not a crisis. Banks already check you could afford repayments at a rate 3 percentage points higher than the one advertised — that's the banking regulator's rule for every lender. Buying as a couple? Two incomes don't simply add up — Hannah and Leo's story.

→ Free tool: run your stress-tested number with the borrowing power calculator.

2. Saving the deposit but forgetting the buying costs. Moneysmart — the government's money-guidance site — suggests aiming for 20% of the price plus the costs of buying: stamp duty, conveyancing, inspections, loan fees. Buyers who save exactly the deposit discover the gap at the worst possible time.

The simple move: add up the whole transaction before you set a price ceiling. Priya and Dan's deposit story walks the full list with real numbers.

3. Assuming LMI protects you. You pay for Lenders' Mortgage Insurance when your deposit is under 20%, so it's natural to assume it covers you. It doesn't — the government's own definition says it protects the lender, not the borrower. It's not a bad product; it's the price of getting in with a smaller deposit. Just know that's what it is — and that a smaller deposit also means a bigger loan and higher monthly repayments.

The simple move: before accepting LMI, check whether a government scheme lets you skip it legitimately — that's the next section.

Scheme mistakes — the help left unclaimed

4. Never checking what you're entitled to. Government help for first home buyers isn't a niche thing anymore. Housing Australia's own report shows more than 1 in 3 first home buyers used the Home Guarantee Scheme (now called the Australian Government 5% Deposit Scheme) in 2024–25 — and Victorians claimed more of those guarantees than any other state. Not checking means competing against buyers with a genuine head start.

The simple move: check your eligibility before setting a budget — schemes change what your deposit can do. The full picture: every scheme explained. Permanent resident? You probably qualify for more than you've been told.

→ Free tool: see which schemes light up for you with the scheme eligibility checker.

5. Buying just over a threshold without realising. In Victoria, the State Revenue Office waives stamp duty entirely for eligible first home buyers up to $600,000, with a partial discount up to $750,000. Cross $600,000 without knowing and you don't just pay more for the house — you also start paying duty a sub-$600k home would have avoided. Why the first dollar over $600,000 is so expensive.

The simple move: know where your target price sits against both thresholds before you offer. And note the $10,000 First Home Owner Grant is for new homes only — Steph and Marcus found the grant wasn't even the biggest saving available to them.

6. Getting the First Home Super Saver sequence wrong. The FHSS lets you save deposit money inside super, where it's taxed lightly, then withdraw up to $50,000 of your voluntary contributions for your first home. The catch is sequence: you must get an FHSS determination from the tax office and request the release in the right order — and if you've already signed a contract, the release request must be lodged within 90 days of signing or your withdrawal cops extra tax. The money also takes around 15–20 business days to arrive, so it's not a last-minute settlement move.

The simple move: if you're saving through super, sort the determination and release paperwork before you start making offers — not after you've signed. How the scheme works — Jordan's story.

Search mistakes — between you and the right home

7. Budgeting off the advertised price guide. Advertising a home below its expected price — underquoting — is against the law in Victoria, and the government actively polices it: the state's Underquoting Taskforce has issued more than 260 fines totalling over $3 million since 2022. The protection built for you: every Victorian listing must display a Statement of Information showing the three most comparable recent sales.

The simple move: budget off those comparable sales, not the number in the ad. If the guide sits well below the comparables, that tells you something about the campaign.

8. Choosing a suburb without doing the research. Most buyers settle on a suburb from a friend's tip or wherever the map happened to be zoomed — and then spend months confirming that choice instead of testing it. But school catchments follow street addresses, not suburb names, and safety is a published number, not a feeling.

The simple move: write down your non-negotiables first — school zone, commute, space — then let the data shortlist the suburbs that pass. The method, walked through — Priya and Dan's suburb story.

Inspection mistakes — fifteen minutes, well spent or wasted

9. Walking through an open home without a checklist. An open home runs 15–30 minutes, and most buyers spend them picturing their furniture in the rooms rather than checking the things that matter. Moneysmart's advice for this exact moment: buying is emotional, so decide your limits before you fall for a place.

The simple move: bring a short checklist — wet areas, taps, windows, cracks — and a few direct questions for the agent. What to check and what to ask — Mel's inspection story.

10. Skipping the professional inspection and the due diligence checklist. Two documents exist precisely to save you here. First, sellers are legally required to make the government's due diligence checklist available to buyers — it covers the unglamorous questions like flood risk, easements and owners corporation rules. Second, a professional building and pest inspection costs a few hundred dollars — small next to what it can find. The risk is real rather than theoretical: a survey cited by Victoria's Auditor-General found about 1 in 4 residential builds ends in a dispute between owner and builder.

The simple move: read the checklist, and book the inspection on any home you're serious about.

Legal mistakes — signatures and hammers

11. Signing before anyone reads the contract — or bidding at auction unprepared. Before a Victorian home is sold, the seller must give you a vendor's statement (the Section 32) disclosing the title, easements, covenants and costs attached to the property. A conveyancer reads it before you commit — that's the entire point of the document. Buying privately, most buyers also get three business days to change their mind. At auction the rules flip completely: there is no cooling-off and no conditions — win the bid and you've bought the home, deposit due that day.

The simple move: contract and Section 32 reviewed before signing anything. For auctions, do everything before the day — finance approved, inspection done, contract checked, and a walk-away number decided while you're calm. The full offer-to-keys process, step by step.

Settlement mistakes — the last hurdle

12. Transferring settlement money without double-checking who's receiving it. In the days before settlement, criminals sometimes impersonate or hack a conveyancer's email and send buyers "updated" bank details. The government's Scamwatch has documented buyers losing six-figure sums this way — in one case through an email sent from the solicitor's real, compromised address. The defence is simple and works every time.

The simple move: before transferring any large amount, ring your conveyancer on a phone number you found yourself — from their website or your first meeting, never from the email — and confirm the account details out loud.

And one thing to know, just in case: if repayments ever become a struggle after you move in, you don't have to wait until you've missed one. Every borrower has a legal right to ask their lender for a hardship variation — a pause or reduction while you get back on your feet — and the lender must respond in writing within 21 days. The National Debt Helpline (1800 007 007) is free. Asking early is the smart move, not the embarrassing one.

The pattern in all twelve

Every mistake on this list is the same one wearing different clothes: deciding on feelings where a number or a document existed. The buyers who avoid them aren't smarter — they just check. Checking is the whole method, and the complete first home buyer guide walks it end to end.

General information only — not financial, legal, or tax advice. Scheme rules, caps and thresholds change; confirm current details with the official sources linked above and with licensed professionals.