The Ultimate First Home Buyer Checklist: Your Complete Step-by-Step Guide (2026)

Phase 1: Get Your Finances Ready

Before you even start browsing Domain or realestate.com.au, you need your finances in order. This phase is where most first home buyers either set themselves up for a smooth purchase or create months of frustration down the track. Get these five steps sorted first.

Step 1. Know Your Budget

The golden rule is that your total housing costs should not exceed 30% of your gross household income. Housing costs include your mortgage repayment, council rates, strata (if applicable), home insurance and maintenance. If you earn $100,000 gross per year, that means roughly $2,500 per month or $577 per week as your maximum total housing cost.

Your borrowing power is different from your budget. Lenders will often approve you for more than you can comfortably repay. A typical borrowing formula is 5 to 6 times your gross annual income, but this does not factor in your actual lifestyle, savings habits or comfort level. Just because a lender says you can borrow $600,000 does not mean you should.

Here is a quick way to estimate your borrowing power:

• Single income of $80,000: Approximate borrowing capacity of $400,000 to $480,000
• Single income of $100,000: Approximate borrowing capacity of $500,000 to $600,000
• Combined income of $150,000: Approximate borrowing capacity of $750,000 to $900,000
• Combined income of $200,000: Approximate borrowing capacity of $1,000,000 to $1,200,000

These are rough guides only. Your actual capacity depends on your debts, dependants, living expenses and the lender's assessment rate (typically 3% above the actual interest rate). Use our borrowing capacity tool for a personalised estimate across 60+ lenders.

Step 2. Check Your Credit Score

Most Australian lenders require a credit score of at least 600 for a standard home loan, and a score above 700 opens the door to the best rates and widest lender selection. Your credit score is a number between 0 and 1,200 (Equifax scale) that represents your credit history. Lenders use it as a quick gauge of how risky you are as a borrower.

How to check your score for free

You can check your credit score for free, and it will not affect your score to do so. The three main credit reporting bureaus in Australia are:

• Equifax (formerly Veda) at equifax.com.au
• Experian at experian.com.au
• illion at illion.com.au

Check all three, because lenders use different bureaus and your score can vary between them. You are entitled to a free copy of your credit report from each bureau once every 12 months.

What hurts your credit score

• Missed or late payments on any credit product (even a $50 phone bill)
• Defaults and court judgments
• Too many credit applications in a short period
• High credit card utilisation (using most of your available limit)
• Short credit history (being young is not ideal here, but it improves with time)

Credit score ranges (Equifax)

Step 3. Save Your Deposit

The standard deposit is 20% of the purchase price, but you can buy with as little as 5% using the First Home Guarantee, and even less with a guarantor loan. How much you need to save depends on how much you want to borrow and whether you are willing to pay Lenders Mortgage Insurance (LMI) or use a government scheme.

Deposit amounts at a glance

Understanding LMI

Lenders Mortgage Insurance is a one-off premium you pay when your deposit is less than 20%. It protects the lender (not you) if you default. LMI can cost anywhere from $8,000 to $35,000 depending on the loan amount and your loan-to-value ratio (LVR). It is usually added to your loan balance.

Ways to avoid LMI:

• Save a 20% deposit
• Use the First Home Guarantee (5% deposit, no LMI)
• Use a guarantor (family member provides additional security)
• Some lenders waive LMI for certain professions (doctors, lawyers, accountants, engineers)

First Home Super Saver Scheme (FHSSS)

The FHSSS lets you save for your first home inside your super fund, where contributions are taxed at 15% instead of your marginal tax rate. You can contribute up to $15,000 per financial year and withdraw a maximum of $50,000 in total (plus associated earnings). For someone on a marginal tax rate of 32.5%, this effectively gives you a tax saving of 17.5 cents on every dollar you save through the scheme. Apply to the ATO to release your FHSSS funds before you sign a contract.

Genuine savings

Most lenders require evidence of genuine savings, meaning funds you have accumulated over time (typically 3 to 6 months). Genuine savings include regular savings deposits, term deposits, shares held for at least 3 months and equity in another property. Gifts from family generally do not count as genuine savings unless they have been in your account for at least 3 months, though some lenders are more flexible here, especially under the First Home Guarantee.

Step 4. Reduce Your Debts

Every dollar of existing debt reduces the amount a lender will let you borrow, and some debts hit harder than others. Before you apply for a home loan, take a hard look at your existing financial commitments. Lenders assess your ability to repay based on your income minus all existing obligations.

How debts affect your borrowing power

Step 5. Get Your Documents Ready

Having your documents ready before you apply saves weeks of back-and-forth with your lender and broker. Here is the complete document checklist. Start gathering these now, even if you are months away from applying.

Income documents

• 2 most recent payslips (showing year-to-date earnings)
• Most recent tax return and Notice of Assessment (ATO)
• Employment verification letter (on company letterhead, confirming role, salary and tenure)
• Group certificate or PAYG payment summary
• If self-employed: 2 years of tax returns, Notice of Assessment, and business financials (profit and loss, balance sheet)

Savings and assets

• 3 months of bank statements for all accounts (savings, everyday, term deposits)
• Evidence of share holdings or managed funds (if applicable)
• Superannuation balance statement
• FHSSS determination letter (if using the scheme)

Identification

• Australian driver licence or passport
• Medicare card
• One additional form of ID (birth certificate, citizenship certificate, or foreign passport with valid visa)

Existing debts

• Current HECS-HELP balance (from myGov)
• Latest statements for any credit cards, personal loans, car loans or BNPL accounts
• Details of any other regular financial commitments (child support, maintenance payments)

Rental history

• Rental ledger or 6 months of rental payment receipts
• Contact details for your current property manager or landlord

Phase 2: Understand Your Options

Now that your finances are in order, it is time to understand what help is available and what type of loan suits you. This phase is about making informed decisions before you commit.

Step 6. Government Grants and Schemes by State

Australian first home buyers have access to grants, stamp duty concessions and deposit guarantee schemes that can save tens of thousands of dollars in upfront costs. The landscape of government support for first home buyers is more generous in 2026 than it has been in years. Here is what is available.

First Home Owner Grant (FHOG) by state

Federal schemes

First Home Guarantee (FHG). Purchase with just 5% deposit and no LMI. The government guarantees the remaining 15% to the lender. From October 2025, places are uncapped and income caps have been removed. Property price caps vary by location. Administered by Housing Australia.

Regional First Home Buyer Guarantee. Similar to the FHG but specifically for buyers purchasing in regional areas. You must have lived in the region (or an adjacent region) for at least 12 months. 5% deposit, no LMI.

Family Home Guarantee. For single parents with at least one dependent child. Purchase with as little as 2% deposit, no LMI. Available for both first home buyers and previous homeowners.

Help to Buy (shared equity). The government co-purchases up to 40% of a new build or 30% of an existing property, reducing the amount you need to borrow. You own the home outright (no rent to the government), but they hold an equity stake and receive their proportional share when you sell. Subject to income caps and property price limits.

First Home Super Saver Scheme (FHSSS). Save up to $50,000 for your first home deposit inside your super, where contributions are taxed at just 15%. Withdraw via the ATO when you are ready to buy. See the ATO website for details.

Step 7. Choose Your Loan Type

The three main choices are variable, fixed or split rate, and the right answer depends on your risk tolerance, cash flow and how long you plan to hold the property. Understanding loan types now saves you from choosing blindly later when there is pressure to sign.

Variable vs fixed vs split

Principal and interest vs interest only

Principal and interest (P&I) means each repayment covers both the interest owed and a portion of the loan balance. Your loan reduces with every payment. This is the standard for owner-occupied home loans and what most first home buyers should choose.

Interest only (IO) means you only pay the interest for a set period (usually 1 to 5 years). Your loan balance does not reduce. IO loans are primarily used by property investors for tax purposes. They are not recommended for first home buyers in most cases because you build no equity during the IO period.

Offset accounts and redraw

An offset account is a transaction account linked to your home loan. The balance in the offset reduces the loan amount that interest is calculated on. If you have a $500,000 loan and $50,000 in your offset, you only pay interest on $450,000. For most borrowers, an offset account is the single most valuable loan feature after the interest rate itself.

A redraw facility lets you access extra repayments you have made on your loan. It works similarly to an offset but with some key differences around accessibility and tax implications for investors.

Read our detailed comparisons: Fixed vs Variable Home Loans | P&I vs Interest Only | Offset vs Redraw

Step 8. Get Pre-Approved

Pre-approval is a written confirmation from a lender of how much they will lend you, and it is the green light to start making offers. Think of pre-approval as your budget stamp of approval. It is not a guarantee of final approval (that comes after you find a property and the lender values it), but it gives you confidence to search within your range and shows agents and sellers you are serious.

Conditional vs unconditional approval

Conditional (pre-approval): The lender has assessed your income, debts and credit history and is willing to lend you up to a certain amount, subject to conditions. Those conditions typically include a satisfactory valuation of the property and no material change to your financial circumstances. This is what you get before you find a property.

Unconditional (formal approval): The lender has assessed the specific property, verified everything and confirmed the loan without conditions. This is what you get after you sign a contract and the lender has valued the property. Unconditional approval is the signal that your loan is locked in.

How long does pre-approval last?

Most pre-approvals are valid for 90 days (3 months). Some lenders offer 6-month validity. If your pre-approval expires before you find a property, it can usually be renewed quickly, provided your financial situation has not changed.

Phase 3: Find Your Property

With your finances sorted and pre-approval in hand, it is time for the exciting part. But do not let excitement override your homework.

Step 9. Research Suburbs

The suburb you buy in matters as much as the property itself, and thorough due diligence now protects you from expensive surprises later. A beautiful house in a poorly chosen location can underperform a modest unit in a great suburb. Here is your suburb research checklist.

Suburb due diligence checklist

• Commute time: Drive or take public transport to work from the suburb during peak hour, not just on a quiet weekend.
• School catchments: Even if you do not have kids, being in a good school catchment adds value and resale appeal.
• Infrastructure: Check for upcoming train stations, road upgrades, shopping centres or hospitals. These drive long-term growth.
• Median price trends: Look at 5 and 10-year price growth using CoreLogic, Domain or SQM Research data. Consistent growth above the city average is a strong signal.
• Rental yield: Even as an owner-occupier, knowing the rental yield tells you about demand and gives you a safety net if your circumstances change.
• Flood and bushfire zones: Check your state's natural hazard mapping tool. Properties in high-risk zones can face insurance premiums of $5,000 to $10,000 per year and may be harder to sell later.
• Council development applications (DAs): Check your local council's DA register for nearby developments. A new apartment tower next door can affect your views, privacy and parking.
• Crime statistics: Check the Bureau of Crime Statistics website for your state to understand crime rates by suburb.
• Visit at different times: Drive through on a Friday night, a Sunday morning and a weekday afternoon. Each visit tells you something different about the neighbourhood.

Step 10. Make an Offer or Bid at Auction

How you buy depends on whether the property is sold by private treaty (negotiation) or at auction, and the rules are different for each. Understanding the process for both ensures you do not get caught off guard.

Private treaty (negotiation)

Most properties in Australia are sold by private treaty. You make an offer to the agent (usually in writing), and the seller can accept, reject or counter-offer. Your offer should be:

• Subject to finance: This gives you a way out if your loan is not approved for this specific property. Essential for first home buyers.
• Subject to building and pest inspection: This lets you exit the contract if the inspection reveals serious issues.
• Subject to a satisfactory strata report (if applicable): For units and townhouses, a strata report reveals the financial health of the owners corporation and any upcoming levies or issues.

Auction

At auction, there is no cooling-off period and the sale is unconditional. This means you need to do all your due diligence before the auction, including:

• Getting a building and pest inspection done before auction day
• Having your solicitor review the contract before auction day
• Confirming your finance is in order (ideally having unconditional approval or very strong pre-approval)
• Setting a firm maximum bid and sticking to it no matter what

Cooling-off periods by state

Phase 4: Settlement and Beyond

You have found your property and your offer has been accepted. Now the real behind-the-scenes work begins. This phase is largely handled by your broker, lender and conveyancer, but understanding each stage helps you stay on top of things.

Step 11. Contract to Settlement

The period from signing the contract to settlement typically takes 30 to 90 days and involves 7 key stages. This is where your broker, lender and conveyancer earn their keep. Here is what happens in order.

The 7 stages from contract to keys

1. Contract exchange: You and the seller sign the contract of sale. You pay the initial deposit (usually 0.25% to 10% of the purchase price depending on the state and the negotiation). The cooling-off period starts (if applicable).
2. Building and pest inspection: If your contract is subject to a satisfactory inspection, this is done within the first few days. If serious issues are found, you can negotiate repairs, a price reduction, or exit the contract.
3. Formal loan application: Your broker submits the full application with the signed contract to the lender. The lender orders a property valuation.
4. Property valuation: A qualified valuer inspects the property and provides a valuation report to the lender. If the property values at or above the purchase price, the process continues. If it values below, you may need to renegotiate, find additional funds or change lenders.
5. Unconditional approval: The lender reviews the valuation and all documentation, then issues unconditional (formal) approval. This is the point where your loan is confirmed.
6. Loan documents signed: The lender sends you the loan agreement and mortgage documents. You sign and return them (usually via electronic signing). Your broker will walk you through each document.
7. Settlement: Your conveyancer coordinates with the seller's conveyancer and the lender. On settlement day, the lender releases the funds, the purchase price is paid, the title is transferred, and you collect your keys.

What can go wrong

• Low valuation: If the property values below your purchase price, the lender may not approve the full loan amount. Options include renegotiating the price, providing additional funds, or trying a different lender with a different valuer panel.
• Employment changes: Do not change jobs, go part-time or take unpaid leave between pre-approval and settlement. Lenders verify employment right before settlement.
• New debts: Do not take out any new credit (car loans, personal loans, new credit cards, BNPL) during this period. It changes your serviceability and can cause the lender to withdraw approval.
• Delayed settlement: Sometimes settlements are delayed due to lender processing, document issues or the seller's circumstances. Your conveyancer will keep you informed and manage extensions if needed.

Step 12. Settlement Day

Settlement day is when you officially become a homeowner. Your lender releases the funds, the title transfers to your name, and you collect your keys. In most states, settlement is now handled electronically via PEXA, so there is no physical meeting at a land titles office. Your conveyancer and lender coordinate everything behind the scenes.

Your settlement day checklist

• Final inspection: Conduct a final walk-through of the property in the 1 to 2 days before settlement. Check that everything is as per the contract, all agreed fixtures are in place and the property is in the same condition as when you made your offer.
• Home insurance: Arrange building insurance to start from settlement day. If you are buying a unit, check that the strata has building insurance and arrange your own contents insurance.
• Utilities: Contact electricity, gas, water and internet providers to set up accounts from settlement day. Some states allow online transfers.
• Address updates: Update your address with banks, super fund, Medicare, electoral roll, employer and any subscriptions.
• First repayment: Your lender will confirm when your first mortgage repayment is due (usually 30 days after settlement). Set up a direct debit so you never miss a payment.
• Keys and access: Your agent will arrange key handover once settlement is confirmed. This is usually in the afternoon on settlement day.

Phase 5: Your First Year as a Homeowner

Congratulations, you own a home. But the smart moves you make in the first 12 months can save you thousands over the life of your loan.

Step 13. Optimise Your Loan

Small changes in the first year of your loan can shave years off your mortgage and save tens of thousands in interest. Most first home buyers set up their loan and then never look at it again. That is a costly mistake. Here are the four things to action in your first year.

1. Use your offset account

Make your offset account your primary transaction account. Every dollar sitting in it reduces the interest you pay. If your salary of $5,000 per month sits in your offset for even a few days before being spent, that saves you interest on $5,000 during those days. Over 30 years, this adds up to thousands.

2. Switch to fortnightly repayments

Instead of paying monthly, split your monthly repayment in half and pay it fortnightly. Because there are 26 fortnights in a year (but only 12 months), you end up making the equivalent of 13 monthly payments per year instead of 12. On a $500,000 loan at 6%, this one change can save over $90,000 in interest and knock 5 to 6 years off your loan term.

3. Make extra repayments

Any bonus, tax refund, pay rise or windfall that you put towards your mortgage reduces your principal and therefore the interest you pay for the remaining life of the loan. Even an extra $100 per month on a $500,000 loan can save over $40,000 in interest.

4. Review your rate after 6 months

Lenders often offer their best rates to attract new customers, then quietly increase the rate through back-book repricing. After 6 months, check whether your rate is still competitive. If it is not, your broker can negotiate with your lender or help you refinance to a better deal. Use our free loan health check tool to see how your rate compares.

Vish

Founder and Licensed Mortgage Broker

Vish founded Lendera after buying 3 properties before turning 24 and seeing firsthand how gatekept lending information was. He holds a double degree from the University of Sydney and has access to 60+ Australian lenders.

Read more about Vish and the Lendera team →