The Pros and Cons of First Home Buyer Mistakes

The Deposit That Looked Healthy Until the Lender Checked

Your deposit needs to be genuine savings, not just savings. A lender defines genuine savings as money held in your name for at least three months, ideally in a single account with regular contributions. Money transferred from a parent's account the week before you apply does not count, even if the funds were always intended for you.

Consider a buyer purchasing in Kew East who showed $60,000 in their transaction account at application. Half of it had been sitting there for six months. The other half arrived two weeks earlier from a family member. The lender counted only the genuine portion, which pushed the borrower over the 10% deposit threshold and triggered Lenders Mortgage Insurance they had not budgeted for. The extra $8,000 in LMI pushed settlement costs beyond what they had available, and the contract fell through.

If you are receiving gifted funds, the gift needs to be declared, and most lenders will still require you to demonstrate a portion of genuine savings alongside it. A documented gift is not a problem. A deposit that appears from nowhere two weeks before settlement is.

Changing Jobs After Pre-Approval

Pre-approval is conditional on your circumstances staying the same. Starting a new job, even in the same industry at the same income level, can void that approval.

Lenders assess income stability differently depending on employment type. If you move from permanent employment to a contract role, even at higher pay, many lenders will require you to complete a minimum probation period or provide six to twelve months of payslips in the new role before they will lend. Some lenders treat probation periods as disqualifying, others do not.

In our experience, buyers assume that because their income has increased, the lender will be more comfortable. That is not how credit policy works. A change in employment introduces new risk, and the lender reassesses from scratch. If you are under contract and switch jobs without telling your broker, you are likely to have your approval withdrawn days before settlement.

Borrowing at the Absolute Limit of Your Capacity

Some lenders will approve you for more than you can comfortably afford. Borrowing capacity is not the same as a sustainable repayment.

Lenders calculate serviceability using a buffer rate, typically three percentage points above the actual rate you will pay. If you are approved at the upper limit of that calculation, any rate rise, income reduction, or unexpected expense puts immediate pressure on your household budget. Buyers in areas like Kew East often stretch to meet the median, which currently reflects the premium attached to the school zones and proximity to the Eastern Freeway, and find themselves with no room to absorb even minor financial disruption.

The other risk is that maximum borrowing capacity assumes you have no other financial goals. If you want to renovate, start a family, or take parental leave within the first few years of owning the property, borrowing at your ceiling removes those options. Build a margin between what you are approved for and what you are willing to commit to.

Skipping the Pest and Building Inspection

An inspection costs between $500 and $800 depending on the property type. Skipping it to save money or speed up an offer in a multi-bid scenario is one of the most expensive decisions a first home buyer can make.

Kew East has a mixture of post-war brick homes, renovated Edwardian cottages, and newer townhouse developments. Older homes in the area can present with timber pest activity, rising damp, or outdated electrical and plumbing systems that are not immediately visible during a fifteen-minute private inspection. A building report picks up structural defects, illegal building work, and hazardous materials. A pest inspection identifies active termites or damage that could cost tens of thousands to remediate.

If the report uncovers issues, you have the option to renegotiate, request repairs, or withdraw under the building inspection clause in your contract. If you waive the inspection to make your offer more attractive and discover the problems after settlement, you own them.

Overcommitting to a Fixed Rate Without Understanding Break Costs

Locking in a fixed interest rate feels like certainty, and it is, until your circumstances change. If you need to sell, refinance, or make a large extra repayment during the fixed period, most lenders will charge break costs.

Break costs are calculated based on the difference between the fixed rate you locked in and the current wholesale rate the lender can now charge. If rates have fallen since you fixed, you will pay the lender for the income they are losing by letting you out early. That figure can run into the thousands, sometimes tens of thousands, depending on how much time remains on your fixed term and how far rates have moved.

Some first home buyers fix 100% of their loan because they want repayment stability, then find themselves unable to afford the break cost when they want to upsize or renovate two years later. A split structure, where part of the loan is fixed and part is variable with an offset account, gives you rate protection and flexibility in the same package.

Applying for New Credit Between Approval and Settlement

Your lender runs a final credit check before settlement. If your credit file has changed since your approval was issued, they can and will withdraw funding.

Buying furniture on interest-free finance, opening a new credit card to collect points, or financing a car in the weeks leading up to settlement all appear on your credit report as new liabilities. Even if you have not drawn down the full limit, the lender includes the entire available balance when recalculating your serviceability. That recalculation can push you outside their lending criteria, and your loan will not settle.

Wait until after settlement to apply for any new credit. If you need furniture or appliances, save separately or use existing funds. The risk is not worth the reward.

Misunderstanding Stamp Duty Concessions and Eligibility

Victoria offers a full stamp duty exemption on properties up to $600,000 for eligible first home buyers, with a sliding concession available up to $750,000. That concession applies to both new and established homes, provided the property will be your principal place of residence.

The eligibility requirements are strict. You and anyone purchasing with you must be over 18, must be Australian citizens or permanent residents, must not have previously owned property in Australia or anywhere else, and must move into the property within twelve months of settlement and live there continuously for at least twelve months. If you buy with a partner who previously owned property overseas, even decades ago, you are ineligible for the concession.

Buyers sometimes assume the $10,000 First Home Owner Grant applies to all purchases. It does not. In Victoria, the grant is only available for new homes valued up to $750,000. If you are buying an established home in Kew East, you will not receive the grant, regardless of whether you qualify for the stamp duty concession.

Not Using a Broker Who Works With Multiple Lenders

Going directly to your current bank feels straightforward, but it limits your options to a single credit policy, a single rate card, and a single appetite for your specific circumstances.

Some lenders do not charge LMI for certain professions. Others allow higher borrowing capacity for the same income. Some will accept rental income from a property you are about to vacate, others will not. Some lenders assess overtime and bonuses differently, and some have postcode restrictions that rule out certain suburbs entirely. If you apply to one lender and get declined or receive unfavourable terms, that decision does not mean you are unbankable. It means that lender's policy does not suit your situation.

A broker working across a panel of lenders can position your application to the lender most likely to approve it on the terms that suit your goals. That might mean a lower rate, access to offset, a longer interest-only period for cash flow management, or waived LMI. The service is complimentary to you because brokers are paid by the lender on settlement, and the rate you receive is the same whether you go direct or through a broker.

Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions