First Home Buyer Guide Australia 2026: What You Actually Need to Know

The Real State of First Home Buying Right Now

I pulled the latest ABS Lending Indicators this morning - the December Quarter 2025 release - and the numbers genuinely surprised me. 31,783 first home buyers took out loans last quarter. That's a 6.8% jump and the biggest rise since December 2023. The average first home buyer loan hit $607,624, up a record 8.5% in just one quarter.

I dig into the ABS data before writing every one of these articles because I want to give you real numbers, not opinions. And right now, those numbers are encouraging. Lenders are saying yes more often, government schemes are making deposits smaller, and the market hasn't frozen first-timers out - despite what the headlines say.

But the data tells you something else too. I looked at the state-by-state breakdown and the average loan sizes are climbing because property prices haven't stopped. The national median home value sat at $912,465 in January 2026. If you're in Sydney, the average loan is $828,065. In Hobart, it's $483,920. Where you buy matters enormously.

I've helped hundreds of first home buyers over the past 11 years, and the ones who get the best outcomes aren't the ones with the biggest incomes. They're the ones who understand how the system works before they start.

How Much Deposit Do You Actually Need?

The traditional answer is 20% - and if you can manage it, you'll avoid Lenders Mortgage Insurance (LMI) and get better rates. On a $700,000 property, that's $140,000. For most people under 35, that number feels impossible.

Here's what I tell my clients: you don't need 20%. Most lenders will approve you with as little as 5%, and some government-backed schemes let you go even lower. I've written a detailed breakdown of how much deposit you actually need that covers every option from 2% to 20%.

The deposit breakdown by percentage

• 20% deposit - No LMI, best interest rates, strongest negotiating position. On a $600,000 home, that's $120,000.
• 10-15% deposit - LMI applies (typically $8,000-$15,000 depending on loan size), but most major banks will lend here comfortably.
• 5% deposit - Possible through the First Home Guarantee scheme. The government guarantees up to 15% of your property value, so you avoid LMI entirely with just 5% down.
• 2% deposit - The new Help to Buy scheme launched in 2025 allows eligible buyers in with just 2%, with the government taking a shared equity stake.

When I was on the lender side, I saw thousands of applications. The deposit amount matters, but what kills more applications is what's in your savings history. Lenders want to see genuine savings - money you've put aside consistently over 3-6 months. A lump sum gift from parents is fine, but you'll still need to show your own savings discipline alongside it.

What counts as genuine savings?

• Regular deposits into a savings account over 3+ months
• Term deposits
• Shares or managed funds held for 3+ months
• Equity in another property

What doesn't count: tax refunds sitting in your account for a week, borrowed money presented as savings, or crypto (most lenders still won't touch it).

Government Grants and Schemes - What's Actually Available in 2026

This is where first home buyers have a genuine advantage right now. When I went through the ABS media release that accompanied the December quarter data, they specifically noted that the surge in first home buyer activity was "supported by the expansion of the Federal Government's 5% Deposit Guarantee and the launch of its Help to Buy scheme." I'm seeing this play out in my own pipeline - more first home buyers are getting across the line right now than at any point in the last two years.

First Home Owner Grant (FHOG)

Each state runs its own version. Here's what's current:

Queensland and Tasmania stand out at $30,000 each - that's a genuine deposit contribution on a regional property.

First Home Guarantee (formerly First Home Loan Deposit Scheme)

35,000 places per financial year. You need just 5% deposit and pay zero LMI. The government guarantees the rest up to 15%. Income caps apply: $125,000 for singles, $200,000 for couples. This is administered through Housing Australia and you apply through a participating lender - which is where a broker helps, because not all lenders are on the panel.

Help to Buy (Shared Equity Scheme)

Launched mid-2025. The government contributes up to 40% of a new home's price (or 30% for existing homes) as an equity partner. You need just 2% deposit. When you sell, the government gets their percentage back. It reduces your loan size dramatically, but you're sharing your capital gains. I always tell clients to run the numbers both ways before committing.

Stamp Duty Concessions

Every state offers first home buyer stamp duty relief. In NSW, you pay zero stamp duty on properties up to $800,000. In Victoria, it's a full exemption on homes up to $600,000. This saves $20,000-$40,000 depending on your state and purchase price. Check Revenue NSW or your state's revenue office for current thresholds.

What Lenders Actually Look At (From Someone Who Used to Be One)

I spent years on the lender side approving and declining applications. Here's what the assessment actually looks like from the inside.

Borrowing power - the calculation that matters most

Lenders use a servicing buffer - currently the higher of 3% above your actual rate or a floor rate (usually around 5.5%). So if your rate is 6.2%, they test whether you can afford repayments at 9.2%. This is why your borrowing power feels lower than you expect.

On a household income of $150,000, most lenders will approve roughly $700,000-$850,000 depending on your debts, dependants and living expenses. But the range between the most generous lender and the most conservative can be $150,000 or more. That's not a typo - I've seen it repeatedly.

The expenses deep dive

Since the Hayne Royal Commission, lenders scrutinise expenses aggressively. They'll look at your last 3 months of bank statements line by line. Things that raise flags:

• Buy Now Pay Later accounts (Afterpay, Zip) - close these 3 months before applying
• Gambling transactions - even small ones
• Multiple Uber Eats orders (lenders see discretionary spending patterns)
• Credit card limits - even if you pay them off monthly, the limit counts as a liability

My standard advice: clean up your statements for 90 days before applying. Cancel unused subscriptions, close BNPL accounts, and reduce credit card limits to the minimum you need.

Credit score

Most people don't check theirs until it's too late. A score above 700 opens doors. Below 500 makes things difficult but not impossible - we have lenders on our panel who specialise in bad credit home loans. Get your free credit report from Equifax before you do anything else.

Comparing Lenders: Where First Home Buyers Get the Best Deals

Not all lenders treat first home buyers the same. Some have dedicated first home buyer packages with waived fees, free offset accounts, and discounted rates. Others don't care whether you're a first timer or a seasoned investor - same rates, same fees.

Here's how the landscape looks right now for first home buyer-friendly lenders:

Rates are indicative only, based on owner-occupier principal and interest loans. Your actual rate depends on your LVR, loan amount, and overall profile. Rates are subject to change. Information current as of February 2026.

The difference between the cheapest rate (5.49%) and the most expensive (5.99%) here is 0.50%. On a $600,000 loan over 30 years, that's roughly $185 per month or $66,600 over the life of the loan. This is exactly why comparing lenders matters, and it's free to do through a broker. We get paid by the lender, not by you - there's a detailed explanation of how mortgage brokers get paid on our site.

The Real Cost of Buying - Beyond the Deposit

First home buyers consistently underestimate the total cost of purchasing. The deposit is the big number, but these costs add up:

• Stamp duty - $0 to $40,000+ depending on your state and whether concessions apply
• Conveyancing/legal fees - $1,500-$3,000
• Building and pest inspection - $500-$800
• Loan application fees - $0-$600 (many lenders waive this for first home buyers)
• Lenders Mortgage Insurance - $0 (if using a guarantee scheme) to $15,000+ (varies by loan size and LVR)
• Moving costs - $500-$3,000
• Council and water rates - adjusted at settlement
• Home and contents insurance - required before settlement, typically $1,200-$2,500/year

Budget an extra $5,000-$10,000 above your deposit for these costs. I've seen settlements nearly fall over because buyers forgot to account for them.

The Step-by-Step Process (What Actually Happens)

Step 1: Get your finances assessed

Before you look at a single property, talk to a broker or lender and get a clear picture of your borrowing power. Bring your last two payslips, 3 months of bank statements, and your ID. A pre-approval gives you a conditional green light for a specific loan amount - usually valid for 90 days.

Step 2: Research and inspect

Use your pre-approval amount as your ceiling, not your target. Just because a lender will give you $750,000 doesn't mean you should borrow $750,000. Work backwards from the monthly repayment you're comfortable with.

I ran the numbers from the latest ABS lending data and the average monthly repayment across Australia right now is $3,935. In NSW, it's $4,696. I always ask my clients: can your budget handle that alongside council rates, insurance, maintenance, and actually living your life?

Step 3: Make an offer and go unconditional

Once your offer is accepted, you typically have 5-14 days for building inspections and finance approval (the cooling-off period varies by state). Your broker submits the full application to the lender. This is where the detailed assessment happens - the lender verifies everything.

Step 4: Settlement

Usually 30-90 days after exchange. Your solicitor or conveyancer handles the legal transfer. On settlement day, the lender releases funds, the title transfers to you, and you get the keys.

Common Mistakes I See First Home Buyers Make

After 11 years in the industry - first as a lender, now as a broker - these are the patterns I see repeatedly:

Borrowing the absolute maximum. Your maximum borrowing power assumes nothing goes wrong. Interest rates don't rise, you don't lose your job, your car doesn't need replacing. Leave yourself a buffer.

Not getting pre-approved first. I've had clients find their dream home, put in an offer, then discover they can't borrow enough or their credit history has an issue. Pre-approval costs nothing and takes 24-48 hours through most lenders.

Ignoring the comparison rate. A lender might advertise 5.69% but the comparison rate (which includes fees) is 6.15%. The comparison rate is required by law - always check it.

Only talking to their own bank. Your bank knows your salary, your spending, and your savings balance. They have zero incentive to give you their best rate. When I broker a deal, lenders compete for your business - that's how the best rates happen.

Forgetting about ongoing costs. Mortgage repayments are just the start. Budget for council rates ($1,500-$3,000/year), water ($800-$1,200/year), home insurance ($1,200-$2,500/year), and maintenance (budget 1% of your property value per year).

Frequently Asked Questions

How much do I need to earn to buy my first home?

There's no fixed income requirement - it depends on the property price, your deposit, existing debts, and living expenses. As a rough guide, a household income of $100,000 with no other debts could borrow around $550,000-$650,000 depending on the lender. Use our borrowing power calculator for a personalised estimate.

Can I use my super to buy a first home?

Yes, through the First Home Super Saver Scheme (FHSSS). You can withdraw up to $50,000 of voluntary super contributions (plus earnings) for a first home deposit. The tax benefits are significant - contributions are taxed at 15% instead of your marginal rate.

How long does the home loan process take?

From application to settlement, typically 6-12 weeks. Pre-approval takes 1-3 business days with most lenders. Formal approval after you find a property takes 3-10 business days. Settlement is usually 30-90 days after contracts exchange.

Should I fix my interest rate as a first home buyer?

That depends on your risk tolerance and cash flow needs. Fixed rates give you certainty - your repayments won't change for the fixed term. Variable rates are typically lower right now and give you flexibility (extra repayments, offset accounts, redraw). Many of my clients split their loan - fixing a portion for security and leaving the rest variable. Read our detailed comparison of fixed vs variable rates.

Do I need a mortgage broker or can I go direct to a bank?

You can absolutely go direct. But a broker compares 30-80+ lenders for you at no cost - we're paid by the lender, not by you. The main advantage isn't just rate comparison; it's knowing which lender's policies suit your specific situation. A self-employed buyer with 2 years of tax returns gets treated very differently by different lenders.

What happens if my home loan application is declined?

A decline isn't the end. The most common reasons are: insufficient income for the amount requested, credit history issues, or incomplete documentation. A broker can often identify a different lender whose policies better fit your situation. I've placed loans for clients who were declined by 2-3 banks before finding the right lender. The key is not to keep applying everywhere - each application creates a credit enquiry, and too many enquiries in a short period work against you.

Where to From Here

Looking at the ABS figures I pulled for this article, the December 2025 quarter saw the strongest first home buyer activity in two years. Government schemes are more generous than they've been in a decade. Rates are stabilising. If you've been sitting on the fence, the data tells me the market is more accessible right now than it has been recently.

Your first move should be checking your borrowing power. You can book a free consultation with us - we'll review your situation, compare lenders, and give you a clear picture of what's realistic. No obligation, no pressure, and it costs you nothing.