Simple hacks to avoid first home buyer mistakes

Applying without knowing what you can borrow

Most educators start looking at properties before they know what they can actually borrow. Your borrowing capacity depends on your income, existing debts, living expenses, and the lender's assessment rate. Without a clear number, you waste time inspecting homes you cannot afford or miss opportunities to stretch your budget further.

Consider a secondary teacher earning $95,000 with a car loan and a modest amount on a credit card. Before looking at any property, they spoke to a broker and found their borrowing limit was around $520,000, assuming a 10% deposit. They also discovered that paying off the car loan added another $40,000 to their capacity. That single conversation changed the type of property they could pursue.

Get your borrowing capacity assessed early. Knowing the figure lets you search with confidence and gives you time to improve it if needed. You can find out more about how this works at our page on borrowing capacity.

Skipping pre-approval before making an offer

Putting in an offer without pre-approval is a gamble. Pre-approval confirms that a lender is willing to lend you a specific amount, subject to property valuation and final checks. Without it, you risk making an offer on a property only to find out later that no lender will support the purchase at that price.

In our experience, buyers who secure pre-approval before attending auctions or making private treaty offers have a clearer sense of what they can commit to. Pre-approval also signals to vendors and agents that you are a serious buyer, which can matter in a competitive situation.

Pre-approval typically lasts three to six months, depending on the lender. If your circumstances or the property market change during that time, you may need to update it.

Ignoring stamp duty concessions and grants

First home buyers in most Australian states and territories can access stamp duty concessions or exemptions, and in some cases grants of up to $50,000. Yet many educators do not check what they are eligible for until after they have signed a contract.

A primary teacher in Queensland buying a new townhouse valued at $680,000 accessed the first home new home concession, which reduced transfer duty to nil on the residential land component. They also received the $15,000 first home owner grant. Those two concessions saved over $20,000 in upfront costs, which they redirected into furniture and a larger deposit buffer.

Eligibility varies by state, property type, and whether the home is new or established. Some concessions apply only to new builds, while others cover both. Some have income caps or residency requirements. Check your eligibility before you start looking so you can factor the savings into your budget.

Choosing the wrong deposit size

Most lenders require a minimum deposit of 5% under the Australian Government 5% Deposit Scheme, or 10% to 20% for standard loans. A smaller deposit gets you into the market sooner, but it often means paying lenders mortgage insurance unless you qualify for an LMI waiver.

Educators often qualify for LMI waivers with certain lenders, which means you can borrow up to 90% of the property value without paying LMI. That can save you thousands of dollars compared to a standard borrower with the same deposit.

If you have a 10% deposit and access to an LMI waiver, you may be in a stronger position than a buyer with a 5% deposit who still faces upfront costs and higher interest rate margins. Work out what your deposit buys you in terms of loan features, rates, and flexibility before deciding how much to put down.

Overlooking ongoing loan costs

The interest rate is not the only cost of a home loan. Monthly fees, annual package fees, and the absence of features like an offset account can add hundreds or even thousands of dollars to the cost of your loan over time.

An early childhood educator compared two loan options. One had a slightly lower interest rate but charged a $395 annual package fee and did not include an offset account. The other had a marginally higher rate, no annual fee, and a full offset account. Over five years, the second loan cost less overall because the offset account reduced the interest charged on the outstanding balance.

When comparing home loans for teachers, look at the total cost of the loan over the period you expect to hold it, not just the headline rate. Ask about fees, redraw conditions, and whether the loan includes an offset account as standard.

Maxing out your borrowing capacity

Just because a lender will lend you a certain amount does not mean you should borrow it all. Your capacity is based on the lender's assessment of your income and expenses, but it does not account for your personal financial goals, unexpected costs, or the buffer you may want for lifestyle flexibility.

A high school teacher was approved to borrow $600,000 but chose to borrow $520,000 instead. The lower amount gave them room to save for a holiday, cover some furniture costs, and still make extra repayments without feeling stretched. They also kept their repayments comfortably below 30% of their gross income, which left them with breathing room if interest rates moved.

Borrowing less than your maximum capacity gives you flexibility to handle rate rises, take on other financial commitments, or simply live without constant pressure. It also makes it easier to build savings or pay down the loan faster if you choose to.

Not checking your credit file before applying

Your credit file contains information about your borrowing history, including any defaults, late payments, or credit enquiries. Lenders check your credit file as part of the application process, and any negative marks can delay approval or lead to a decline.

We regularly see applications slowed down because the buyer did not know they had a default from an old phone plan or a missed payment from a forgotten account. In some cases, the default was incorrect and could have been disputed before the application was lodged.

Order a copy of your credit file at least a month before you plan to apply. If there are any errors, dispute them. If there are legitimate issues, speak to a broker about how to address them before submitting your application. Some lenders are more flexible than others, and knowing what is on your file lets you position your application accordingly.

Choosing a fixed rate without understanding the trade-offs

A fixed interest rate locks in your repayments for a set period, usually one to five years, but it also limits your ability to make extra repayments and may incur break costs if you refinance early. Many first home buyers fix their rate for the certainty, then find themselves stuck when their circumstances change.

A teaching assistant fixed their rate for three years, then needed to refinance 18 months later to access equity for urgent home repairs. The break costs were over $8,000, which wiped out most of the benefit of refinancing.

If you are considering a fixed rate, check the conditions around extra repayments, early exit, and refinancing. Some lenders allow limited extra repayments on fixed loans. Others do not. If you value flexibility or think your circumstances might change, a variable rate or a split loan structure may suit you more. You can read more about loan structures on our mortgages for teachers page.

Not factoring in settlement costs

The deposit is not the only money you need upfront. Settlement costs typically include legal fees, property inspections, lender fees, and government charges, and can add several thousand dollars to the amount you need at settlement.

Many educators focus on saving the deposit and forget to budget for these extras. Then, a week before settlement, they realise they need another $3,000 to $5,000 and have to scramble to cover it.

When you calculate how much you need to save, add at least $5,000 to your deposit target to cover settlement costs. If you are buying in a state with stamp duty, factor that in too, even if you expect to receive a concession. Having a buffer means you are not caught short at the final stage.

Relying on a single lender without comparing options

Many first home buyers apply directly to the bank they have always used without shopping around. Different lenders offer different interest rates, loan features, and eligibility criteria, and the gap between lenders can be significant.

An educator who went straight to their current bank was offered a variable rate with no offset account and standard LMI. A broker showed them three other lenders, one of which offered a lower rate, an offset account, and an LMI waiver because of their profession. The difference in total cost over five years was over $15,000.

Compare at least three lenders before deciding. A mortgage broker for teachers can help you access lenders you may not be able to approach directly and can often negotiate better terms than you would receive on your own.

Call one of our team or book an appointment at a time that works for you.

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