10 Common Pitfalls to Avoid as a First-Home Buyer

Most first home buyer mistakes aren’t made out of carelessness. They’re made because the rules changed, the advice was outdated, or a decision that looked right at the time turned out to have consequences nobody mentioned upfront. In 2026, three government schemes have launched or expanded, two major state deadlines are weeks away, and interest rates have risen three times this year. The landscape has enough moving parts that mistakes which didn’t exist two years ago are now catching buyers with some regularity.

This guide covers the ten mistakes that appear most consistently across first home buyer applications in 2026: what they are, why they happen, and what to do instead.

What’s Different About Buying a First Home in 2026

Three significant things changed for Australian first home buyers between late 2024 and mid-2026. The federal 5% Deposit Scheme removed its income caps and annual place limits in October 2025, making it available to any eligible first home buyer regardless of income.¹ Help to Buy launched in December 2025 as Australia’s first national shared equity scheme, allowing a 2% deposit with the government co-purchasing up to 40% of the property.² And the RBA hiked the cash rate to 4.35% in May 2026, the third hike of the year, pushing the average variable rate to approximately 6.84%.³

Those three changes have created a more complex landscape to navigate. Buyers who haven’t updated their understanding of what’s available are missing pathways. Buyers who haven’t updated their repayment calculations are underestimating what the loan will actually cost. Buyers rushing to beat state grant and stamp duty deadlines (QLD’s $30,000 grant expires 30 June 2026, Tasmania’s stamp duty exemption on existing homes expires the same day) are making decisions under time pressure that doesn’t always produce the best outcome.⁴

The mistakes that follow are organised into the decisions where things go most wrong, and why.

Want your specific situation mapped before you make any of these decisions? Book a free assessment.

Underestimating the True Upfront Cost

Mistake 1: Saving to the deposit and calling it done. The deposit is the largest upfront cost but not the only one. Buyers who save exactly to their deposit target and then discover at settlement that they’re short for other costs need to either delay or borrow the difference at short notice.

The additional upfront costs beyond the deposit that most first home buyers underestimate:

Cost	Typical range	Notes
Stamp duty	$0 to $30,000+	Depends on state, property value, and eligibility for a first home buyer exemption. Zero in many cases, but needs to be confirmed, not assumed.
Legal and conveyancing fees	$1,500 to $3,000	Varies by state, property complexity, and conveyancer. Budget $2,000 as a baseline.
Building and pest inspection	$400 to $800	Essential before exchange. Not optional. The cost of skipping it is discovering structural problems after settlement.
Lenders Mortgage Insurance (LMI)	$0 to $30,000+	Applies if your deposit is below 20% and you’re not using a scheme that waives it. Can be capitalised into the loan, but it still increases your loan balance and total interest paid.
Loan application and settlement fees	$0 to $1,500	Varies by lender. Many lenders have waived application fees in a competitive market, but always confirm.
Moving costs	$500 to $3,000	Often forgotten in the settlement budget.

Mistake 2: Borrowing beyond genuine repayment capacity. Lenders approve up to a maximum borrowing capacity based on income and expenses. That maximum isn’t a recommendation. It’s a ceiling. A buyer whose monthly repayments sit at or near 40% of take-home income has no buffer for rate increases, reduced income, or unplanned expenses. The RBA’s three rate hikes in 2026 have added approximately $300 per month to repayments on a $600,000 loan compared to late 2025. Buyers who were already at capacity at late-2025 rates are now stretched.

Getting the Deposit Structure Wrong

Mistake 3: Not knowing whether your deposit counts as genuine savings. A deposit that doesn’t meet the lender’s genuine savings definition can result in a declined application even when the dollar amount is sufficient. Gifted funds, work bonuses, tax refunds, and inheritances received recently don’t meet the genuine savings test at most major lenders, even if they’re sitting in your account now. The genuine savings requirement is 5% of the purchase price held for at least three months in demonstrated saving behaviour, and it applies at LVRs above 80%.

The fix is straightforward but time-sensitive: if your deposit isn’t all from accumulated regular savings, either wait for the non-genuine components to age for three months, find a lender with a more flexible genuine savings policy, or use a rental history of 12 months as an alternative. See our Genuine Savings guide and No Genuine Savings guide for the full pathways.

Mistake 4: Planning the deposit around the First Home Owner Grant. The FHOG ($10,000 in most states, $30,000 in Queensland before 30 June 2026) is paid at or after settlement, not before it. It cannot form part of the initial deposit required to exchange contracts. A buyer who budgets their deposit to include FHOG funds that arrive after settlement has a hole in their upfront cash position. The FHOG is useful for covering post-settlement costs or reducing the loan balance, not for funding the exchange deposit.

Missing Government Schemes or Misreading the Rules

Mistake 5: Not knowing the federal 5% Deposit Scheme now has no income cap. Before October 2025, the scheme had income limits of $125,000 for singles and $200,000 for couples, and a fixed annual allocation of places that regularly ran out. Both restrictions were removed on 1 October 2025. Any eligible first home buyer can now access the scheme regardless of income, with no place limit and no annual reset.¹ Buyers who researched the scheme before October 2025 and decided it didn’t apply to their income are operating on outdated information.

Mistake 6: Confusing Help to Buy with the 5% Deposit Scheme, and trying to use both. These are mutually exclusive federal programs. Help to Buy requires a 2% deposit and involves the government co-purchasing up to 40% of the property. You own a smaller share until you buy back the government’s portion. The 5% Deposit Scheme requires a 5% deposit, involves no government co-ownership, and you own 100% of the property from day one. Choosing one means you can’t access the other. The decision hinges on your income (Help to Buy has income caps; the 5% Scheme doesn’t), whether you want full ownership, and the property type.²

For the full breakdown of every scheme available to Australian first home buyers in 2026, see our First Home Buyer Grants and Schemes guide.

Applying to the Wrong Lender in the Wrong Order

Mistake 7: Applying for pre-approval at the wrong lender first. The Federal 5% Deposit Scheme and Help to Buy are only available through Housing Australia’s participating lender panel. Applying for pre-approval at a lender not on the panel and then trying to transfer the scheme benefits doesn’t work. Each application is new, and each application generates a credit inquiry. Buyers who apply at a non-panel lender, get pre-approved, find a property, and then discover they need to reapply at a panel lender to access the scheme have wasted a credit inquiry and potentially delayed their purchase.

Mistake 8: Making multiple loan applications simultaneously. Each full loan application triggers a credit inquiry that appears on your credit file for five years. Multiple inquiries in a short period signal to subsequent lenders that your previous applications may have been declined. Accessing your own credit report (a soft inquiry) doesn’t affect your file, but an application to multiple lenders at the same time does. The solution is to have a broker compare lenders and select the right one before any formal application is submitted.

Making Property and Location Decisions Without Due Diligence

Mistake 9: Skipping the building and pest inspection. The inspection costs $400 to $800. Discovering a significant structural defect, termite damage, or drainage problem after settlement costs multiples of that. There’s no recourse against the seller once you’ve exchanged unconditionally without an inspection clause. In a competitive market, buyers are sometimes pressured to proceed without an inspection to strengthen their offer. The financial risk of doing so almost always outweighs any competitive advantage it creates.

Mistake 10: Buying the property without buying the location. A property that ticks every internal box in the wrong suburb creates problems that no renovation can fix. First home buyers who focus entirely on the property itself (floor plan, condition, presentation) and underweight location research often discover the issues later: limited access to employment, poor transport connections, slow capital growth, or a significant negative development approved for the area after purchase. Research the suburb as thoroughly as the property: check zoning plans, proposed developments, infrastructure announcements, and school zone status before exchange.

Underestimating the Ongoing Cost of Ownership

The mortgage repayment is the most visible ongoing cost, but owning a property creates a set of recurring expenses that renters don’t pay. Buyers who budget for the repayment only often find the first council rates notice or the first significant maintenance bill arrives without a financial buffer in place.

Ongoing cost	Typical annual range	Notes
Council rates	$1,500 to $3,000	Varies by council and property value. Paid quarterly or annually depending on council.
Water rates	$800 to $1,500	Varies by state and usage. Owners pay the service and usage charges renters don’t see.
Building insurance	$1,200 to $3,000	Required by most lenders. Premiums have increased significantly in recent years in some states.
Strata/body corporate (units and townhouses)	$2,000 to $10,000+	Covers building insurance, common area maintenance, and sinking fund contributions. Check the sinking fund balance before purchasing a strata property.
Maintenance and repairs	$2,000 to $6,000	Budget 1% to 2% of the property value per year as a maintenance allowance. Higher for older properties.

A buyer purchasing a $700,000 house should budget an additional $500 to $1,100 per month for ownership costs beyond the mortgage repayment. Factoring this into the borrowing capacity assessment upfront prevents the situation where the repayment is affordable but the full cost of ownership isn’t.

What Catches First Home Buyers Out in 2026 Specifically

Budgeting around the QLD $30,000 grant without securing the contract in time. The Queensland $30,000 First Home Owner Grant applies to contracts signed or foundations laid by 30 June 2026. Fewer than six weeks from this article’s publication date. Buyers in Queensland who are mid-search and planning to use the $30,000 in their deposit or settlement calculations need to treat their contract date as a financial deadline, not just a target. A contract signed after 30 June 2026 triggers a different grant amount that hasn’t been confirmed at the time of writing.⁴

Missing the TAS stamp duty exemption expiry. The 100% stamp duty exemption on existing homes valued up to $750,000 in Tasmania expires on 30 June 2026. Buyers who settle after this date pay standard transfer duty. On a $650,000 property, that’s approximately $20,000 in duty that disappears after the deadline. TAS buyers purchasing existing homes should confirm their expected settlement date immediately.⁴

Planning a purchase around WA’s proposed stamp duty threshold increases. The WA Government’s 7 May 2026 Budget announced proposed increases to the First Home Owner Rate thresholds ($500,000 to $600,000 full exemption, $700,000 to $800,000 Metro concession). These are proposals. They have not yet passed parliament. Buyers who are choosing a purchase price based on the proposed thresholds rather than the current operative ones risk paying more duty than they budgeted for if the legislation doesn’t pass before their settlement date.

Assuming a pre-approval from 2024 or early 2025 reflects current borrowing capacity. Pre-approvals typically expire after 90 days and are reassessed at each lender when resubmitted. More importantly, borrowing capacity calculations use the current interest rate plus the APRA serviceability buffer of 3%. With rates at 4.35% in May 2026, the assessment rate is 7.35%. Buyers operating on borrowing capacity figures calculated at lower rates may find their actual approval comes in lower than expected.

Your Next Steps

1. Build a full upfront cost estimate, not just a deposit target. Add stamp duty (or confirm your exemption), conveyancing, inspections, LMI (or confirm it’s waived), and moving costs to your deposit figure. That’s the total cash you need at settlement.
2. Confirm your deposit meets the genuine savings definition before applying anywhere. If any component is a recent gift, bonus, or lump sum, check whether it needs to age for three months or whether an alternative pathway (rental history, flexible lender) suits your timeline better.
3. Check current scheme eligibility, including the updates since October 2025. The 5% Deposit Scheme now has no income cap. Help to Buy launched in December 2025. If you last researched schemes before those dates, the landscape has changed.
4. If you’re in QLD or TAS, confirm your settlement timeline against the 30 June 2026 deadlines. These are fixed. There’s no extension. Your solicitor or conveyancer can advise on realistic settlement timelines for your specific purchase situation.
5. Have a broker select the right lender before submitting any application. One application to the right lender generates one credit inquiry and an approval. Multiple applications to the wrong lenders generate multiple inquiries and a more difficult subsequent application. The lender selection happens before the application, not after it.
6. Get a building and pest inspection on every established property, unconditionally. The cost is negligible compared to what it protects against. In competitive markets where buyers feel pressure to skip it, the risk profile is highest, not lowest.

Frequently Asked Questions

What is the biggest mistake first home buyers make in Australia?

The most consequential single mistake is applying to the wrong lender: one not on the government scheme’s participating panel, one whose genuine savings policy doesn’t match the buyer’s deposit structure, or applying to multiple lenders simultaneously. Each application generates a credit inquiry that stays on the file for five years. A declined application from the wrong lender makes a subsequent application at the right lender more difficult. Lender selection, done before any application is submitted, is the decision that most directly affects whether the application succeeds.

Do I need a 20% deposit to buy my first home in Australia?

No. The federal 5% Deposit Scheme allows eligible first home buyers to purchase with a 5% deposit and no LMI. Help to Buy allows a 2% deposit with the government co-purchasing a share of the property. Keystart in WA allows a 2% deposit for eligible buyers. Standard lending with LMI also allows as low as 5% without any scheme. The 20% threshold is where LMI stops applying, not where lending starts. See our First Home Buyer Deposit guide for every option.

Can I use the First Home Owner Grant as part of my deposit?

No. The FHOG is paid at or after settlement. It doesn’t arrive in time to fund the exchange deposit. It can be factored into your financial position for post-settlement costs, but it cannot replace the upfront cash required to exchange contracts. Budget your deposit independently of the FHOG, then treat the grant as a settlement or post-settlement benefit.

What happens if I skip the building inspection?

You accept all defects, structural issues, and pest problems without any recourse against the seller once you’ve exchanged unconditionally. Building defects discovered after settlement are your responsibility to rectify at your own cost. The inspection costs $400 to $800. Structural remediation, termite treatment, or drainage repairs can cost tens of thousands. Always include a building and pest inspection clause in your offer, or complete the inspection before making an unconditional offer.

How do I know if I qualify for the federal 5% Deposit Scheme?

The main eligibility requirements: Australian citizen or permanent resident, at least 18 years old, first home buyer (or someone who hasn’t owned property in Australia in the past 10 years in some circumstances), intending to live in the property as your main residence, and purchasing within the scheme’s property price cap for your location. Income caps were removed in October 2025. The scheme is available through Housing Australia’s participating lender panel. You can’t apply directly. A broker can confirm eligibility and identify which panel lenders offer the most competitive rates for your deposit size and income.

Is now a good time to buy a first home in Australia?

The answer depends on your income, deposit, location, and how long you plan to hold the property, not on a general market condition. For buyers with stable income and a qualifying deposit who plan to hold for five or more years, the long-term equity case for buying remains strong regardless of short-term market fluctuations. For buyers stretched to their maximum borrowing capacity in a high-rate environment with no buffer, the risk of rate increases or income disruption is material. The decision should be based on your specific financial position, not on a national market generalisation.

This article contains general information only and does not constitute financial or credit advice. It does not take into account your personal financial situation, objectives, or needs. Government scheme rules, grant amounts, stamp duty thresholds, and lender policies change frequently. Some deadlines and proposed changes referenced in this article are time-sensitive as of May 2026 and may have changed by the time of reading. Before acting on any information in this article, seek professional advice from a licensed mortgage broker or financial adviser. Credit products are subject to lender approval. Broker360 Pty Ltd is not responsible for any actions taken based solely on the content of this article. Information is accurate as of May 2026 and is subject to change.

Sources

1. Housing Australia, Australian Government 5% Deposit Scheme. Income caps and annual place limits removed from 1 October 2025. Available to all eligible first home buyers regardless of income. Property price caps vary by location. housingaustralia.gov.au. Subject to change.
2. Housing Australia, Help to Buy Scheme. Launched 5 December 2025. Government contributes up to 40% (new homes) or 30% (existing homes). Minimum 2% deposit. Income thresholds: $100,000 singles, $160,000 couples and single parents. 10,000 places per year. housingaustralia.gov.au. Subject to change.
3. Reserve Bank of Australia, cash rate decisions 2026. Cash rate at 4.35% following May 2026 decision. Average variable owner-occupier rate approximately 6.84% (Finder, May 2026). rba.gov.au.
4. State grant and stamp duty deadline information: Queensland Revenue Office: $30,000 FHOG applies to contracts signed or foundations laid by 30 June 2026 for new homes under $750,000 (qro.qld.gov.au); State Revenue Office Tasmania , 100% duty exemption on existing homes up to $750,000 settled by 30 June 2026 (sro.tas.gov.au); RevenueWA , proposed stamp duty threshold increases ($600,000 full exemption, $800,000 Metro concession) announced in WA Budget 7 May 2026, subject to parliamentary passage (wa.gov.au/revenueWA). All figures subject to change.

The first home buyers who avoid these mistakes are almost always the ones who mapped their position with a broker before they started making offers, not after. Book a free first home buyer assessment here.