Why First Home Buyers Should Avoid These Common Mistakes

Skipping Pre-Approval and Shopping Without a Budget

Applying for a home loan before you know what you can borrow usually ends badly. A pre-approval tells you your borrowing limit and shows sellers you're serious, but it also forces you to face your actual budget rather than the one you hoped for.

In our experience, buyers in northern suburbs like Salisbury or Elizabeth often underestimate what lenders will ask for upfront. With the Australian Government 5% Deposit Scheme, you can buy with a 5% deposit and avoid paying Lenders Mortgage Insurance. However, that deposit still needs to come from genuine savings, and lenders will also ask you to cover settlement costs like conveyancing, inspections, and title fees. Borrowing close to the property price cap without accounting for those extras leaves you scrambling at the last minute.

Consider a buyer who found a townhouse in Salisbury Downs at the upper end of their range. They had the deposit ready but hadn't set aside money for conveyancing or pest and building reports. Two weeks before settlement, they had to ask family for help and delay the process while the lender reassessed the gift. The contract allowed for it, but the stress could have been avoided by mapping out every cost before signing anything.

Choosing the Wrong Loan Features for Your Situation

Fixed interest rates and variable interest rates each suit different circumstances, and picking the wrong one can cost you thousands in break fees or lost flexibility. A fixed rate locks in your repayment for a set term, which protects you if rates rise but charges break costs if you need to refinance, sell, or make large extra repayments before the fixed term ends. A variable rate moves with the market and usually offers features like an offset account or unlimited extra repayments.

Buyers stretching their budget to get into suburbs like Munno Para or Smithfield often fix their rate for peace of mind, then realise 18 months later they want to sell and upgrade or refinance for a lower rate. Break costs are calculated based on the difference between your fixed rate and the lender's current wholesale rate, multiplied by the remaining term and your loan balance. On a large loan with several years remaining, that figure can run into the tens of thousands.

If you expect your income to increase, plan to make lump sum repayments from a bonus or inheritance, or think you might move within a few years, a variable rate loan with an offset account usually offers more flexibility. If your income is tight and you need predictable repayments, a fixed rate or a split loan structure might make more sense. The decision depends on your circumstances, not on where rates might be heading.

Missing Out on First Home Buyer Stamp Duty Concessions

South Australia offers stamp duty relief on new homes and vacant land for eligible first home buyers, with no property price cap for contracts entered into from June onwards. That concession can save you several thousand dollars, but it does not apply to established homes. Buyers who fall in love with an older home in Andrews Farm or Angle Vale and assume the concession will apply regardless often find out too late that they're paying full stamp duty.

If you're set on an established property, you'll need to budget for stamp duty as part of your upfront costs. If you're open to a new build or buying land and building, the stamp duty relief can free up cash for furniture, landscaping, or a larger deposit. We regularly see buyers who could have accessed the concession but didn't realise the difference between a new home and an established one until after they'd signed the contract.

Ignoring Ongoing Costs and Borrowing to Your Limit

Lenders approve you for a maximum amount based on your income, debts, and living expenses, but borrowing the full amount leaves no buffer for rate rises, repairs, or changes in your circumstances. In northern Adelaide, where many buyers are purchasing their first property while managing shift work, casual income, or young families, a tight budget can become unmanageable quickly.

Consider a scenario where a buyer borrowed the maximum amount to purchase a house in Craigmore. Twelve months later, interest rates had increased, their car needed repairs, and their toddler started daycare. The additional $400 per month in expenses combined with higher repayments left them unable to make extra repayments or build any savings buffer. They couldn't refinance without breaking their fixed rate, and they couldn't sell without taking a loss on stamp duty and selling costs.

When you're working out your budget, calculate repayments at a rate higher than the one you're offered. Most lenders assess your loan at a buffer rate around 3% above the actual rate to make sure you can still afford repayments if rates rise. If your budget is uncomfortable at that buffer rate, you're borrowing too much.

Applying for Credit or Changing Jobs Before Settlement

Your home loan application is assessed based on your financial position at the time you apply, but lenders recheck your credit file and employment status before settlement. Buyers who take out a car loan, open a new credit card, or change jobs between approval and settlement often find their loan is no longer approved.

Lenders calculate your borrowing capacity using your income and your existing debts. A new car loan or credit card reduces how much you can borrow because it increases your monthly commitments. If that pushes you over the lender's debt-to-income threshold, your approval can be withdrawn. Changing jobs can have the same effect, especially if you move from permanent employment to a contract or probationary role. Most lenders won't settle a loan if you're still in your probation period.

If you need a new car or want to change jobs, wait until after settlement. If you're offered a new role you can't refuse, talk to your broker before accepting it so they can check whether your lender will still proceed.

Not Understanding How the 5% Deposit Scheme Actually Works

The Australian Government 5% Deposit Scheme lets eligible buyers purchase with a 5% deposit and avoid paying LMI, but it comes with conditions that trip up buyers who don't read the details. The scheme has property price caps that vary by location. In South Australia, the cap is $900,000 for capital city and regional centres, and $500,000 for other areas. Northern Adelaide suburbs generally fall under the $900,000 cap, but you need to confirm that with your lender.

The scheme is available through participating lenders only, and each lender offers different loan features. Some participating lenders allow offset accounts, others don't. Some offer fixed rates, others only offer variable. You can't assume that every feature available on a standard loan will be available under the scheme. You also can't combine the 5% Deposit Scheme with Help to Buy, though you can use it alongside the South Australian first home buyer stamp duty concessions and the $15,000 first home owner grant if you're buying a new home.

Buyers who assume the scheme means they can buy any property with 5% down, with any lender, and access every loan feature available often find out mid-application that their chosen lender isn't participating, their preferred suburb is outside the cap, or the loan structure they wanted isn't available. Check the eligibility requirements and confirm your lender's participation before you start shopping.

Waiting Too Long to Talk to a Broker

Most buyers contact a broker after they've found a property and signed a contract, but by that point your options are limited. If your income is casual or self-employed, if you're buying with a gifted deposit, or if you've had credit issues in the past, some lenders won't approve your loan at all. Others will approve it but at a higher rate or with fewer features. If you wait until you've signed a contract to find out which lenders will accept your application, you're stuck with whoever will say yes rather than whoever offers the right loan for your situation.

Talking to a mortgage broker before you start looking means you know which lenders suit your circumstances, what deposit you'll need, and what your repayments will look like. You'll also know which suburbs fall within your budget and whether you're eligible for any grants or concessions. That information shapes where you look and what you offer, and it keeps you from wasting time on properties you can't actually buy.

Call one of our team or book an appointment at a time that works for you. We'll run through your situation, confirm what you're eligible for, and get your pre-approval sorted before you start making offers.

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