What Not to Overlook When Preparing for Your First Purchase

What First Home Buyers Need Before Applying for a Home Loan

A complete home loan application requires genuine savings, proof of income, identification documents, and evidence that your deposit is not borrowed. Lenders assess your financial position over at least three months, so preparation should begin well before you start looking at properties.

Consider a buyer purchasing in Calamvale who has saved a 10% deposit but has not tracked where that deposit came from. The lender requests bank statements going back six months and identifies multiple cash deposits that the buyer cannot explain. The application stalls while the buyer hunts for payslips, gift letters from family, and receipts proving the deposits were from legitimate sources. The property is under contract with a 30-day finance clause, and by the time documentation is gathered, rates have moved and the approval is delayed. The contract expires.

Genuine savings are funds held in your name for at least three months. A gift from a parent is acceptable, but the lender will require a signed statutory declaration confirming the funds do not need to be repaid. If you are using the First Home Super Saver Scheme, you will need a determination from the ATO before the funds can be released, and that determination must be obtained before you sign a purchase contract.

How Queensland Stamp Duty Concessions Affect Your Budget

Queensland first home buyers purchasing a new home receive a full transfer duty concession with no property value cap for contracts signed from 1 May 2025. Stamp duty is reduced to nil on the residential land component. For buyers purchasing an established home, a first home concession reduces stamp duty by up to $17,350 on properties valued under $710,000, with the concession phasing out entirely at $800,000.

The difference in upfront cost is substantial. A buyer purchasing a new townhouse in Rochedale South does not pay stamp duty under the new home concession. A buyer purchasing an established house in the same suburb at the same price will pay duty, although the first home concession reduces that amount. The calculation is not intuitive, and buyers often underestimate how much they need at settlement.

You can combine Queensland stamp duty concessions with the Australian Government 5% Deposit Scheme, which allows eligible first home buyers to purchase with a 5% deposit without paying Lenders Mortgage Insurance. The scheme has no income caps and no annual place limits. Applications are made through a participating lender, not directly through Housing Australia. Property price caps apply: in Queensland, the cap is $1,000,000 for Brisbane and regional centres, and $700,000 for other areas.

Fixed Rate or Variable Rate for a First Home Loan

A fixed interest rate locks in your repayment amount for a set term, typically one to five years. A variable interest rate can move up or down in response to broader rate changes. Some buyers split their loan, fixing part and leaving part variable.

The decision depends on your tolerance for repayment fluctuations and whether you expect to make additional repayments during the fixed period. Fixed rate loans often restrict extra repayments to a set annual amount, and break costs apply if you repay the loan early. Variable rate loans typically offer full access to an offset account and unlimited additional repayments.

In our experience, buyers who plan to make irregular lump sum repayments from bonuses or tax returns benefit from the flexibility of a variable rate or split structure. Buyers on a fixed income who prioritise repayment certainty often prefer a longer fixed term. Your lender will calculate the rate based on your deposit size, the property value, and whether LMI applies.

Offset Accounts and Redraw Facilities

An offset account is a transaction account linked to your home loan. The balance in the offset account reduces the loan balance on which interest is calculated. If your loan balance is $400,000 and your offset account holds $20,000, you pay interest on $380,000. You retain full access to the funds in the offset account at any time.

A redraw facility allows you to withdraw additional repayments you have made above the minimum required. Not all lenders offer redraw on all loan products, and some charge fees for each withdrawal. Redraw is not the same as an offset account. Funds in redraw are technically repayments of your loan, and access can be restricted by the lender under certain conditions.

Buyers often assume any extra repayment can be withdrawn without restriction. That assumption can become a problem if you need access to funds quickly and your loan product does not include a full redraw facility or offset account. When comparing home loan options, confirm what access features are included and whether fees apply.

Pre-Approval and Purchase Timing

Pre-approval is a conditional approval from a lender based on your financial position at the time of application. It is not a final approval. The lender will reassess your position when you provide a signed contract of sale, and your circumstances must not have materially changed.

Pre-approval typically lasts three to six months depending on the lender. If your employment changes, your income drops, or you take on additional debt during the pre-approval period, the lender may withdraw or reduce the approval. Buyers who obtain pre-approval and then finance a new car or increase credit card limits without informing their broker often find their borrowing capacity has dropped when they need final approval.

A pre-approval confirms how much you can borrow, but it does not reserve that amount. If the lender's credit policy tightens or rates rise significantly, your borrowing capacity may reduce even if your income has not changed. Pre-approval gives you confidence to make an offer, but it does not eliminate all uncertainty.

What Lenders Mortgage Insurance Means for Low Deposit Buyers

Lenders Mortgage Insurance is a one-off premium that protects the lender if you default on the loan and the property is sold for less than the outstanding balance. LMI is typically required when your deposit is less than 20% of the property value. The premium is calculated based on the loan-to-value ratio and the loan amount, and it is usually added to the loan balance rather than paid upfront.

Under the Australian Government 5% Deposit Scheme, LMI is not payable because Housing Australia guarantees the difference between your deposit and 20% of the property value. Outside that scheme, a buyer with a 10% deposit will pay LMI. The premium can be several thousand dollars depending on the purchase price and the lender's premium rate.

LMI does not reduce over time as you pay down the loan. It is a one-off cost. If you refinance to another lender within a few years and your loan-to-value ratio is still above 80%, you may be required to pay LMI again with the new lender. Some lenders offer LMI portability, but terms vary.

First Home Owner Grants in Queensland

Queensland provides a $15,000 first home owner grant for new homes valued under $750,000 where the contract was signed from 1 July 2026. The grant is not available for established homes. The grant was $30,000 for contracts signed between 20 November 2023 and 30 June 2026.

The grant is paid after settlement, not before. Buyers cannot use the grant as part of their deposit. If your budget depends on receiving the grant to cover settlement costs, you will need access to those funds from another source until the grant is paid. Processing times vary, and delays can occur if documentation is incomplete.

The grant is administered by the Queensland Revenue Office. Your solicitor or conveyancer typically lodges the application on your behalf, but you remain responsible for providing the required documentation. At least one applicant must be an Australian citizen, permanent resident, or specified foreign retiree for agreements entered into from 1 August 2026.

What Happens After You Apply

Once your application is submitted, the lender's credit team assesses your financial position, verifies your documents, and orders a property valuation. If the valuation comes in below the purchase price, the lender will base the loan amount on the lower figure, which increases your loan-to-value ratio and may trigger LMI or reduce your borrowing capacity.

The valuation is ordered by the lender and is not the same as a building and pest inspection. The valuation assesses whether the property is adequate security for the loan. It does not assess the condition of the property or identify structural issues.

Formal approval is issued once the lender is satisfied that your financial position has not changed and the property is suitable security. Approval is subject to conditions, which may include providing final payslips, an updated bank statement, or evidence of insurance. Those conditions must be met before settlement. If you cannot satisfy a condition, settlement can be delayed or the approval withdrawn.

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