Buying your first home? Important things to know
Whether you are exploring home loan options, researching government assistance programmes, or trying to understand stamp duty concessions, this guide covers six essential areas every first home buyer needs to know. For an overview of all your options, read our guide on pathways to home ownership.
Quick summary: This guide walks you through borrowing capacity and budgeting, deposit options and government schemes, NSW first home buyer benefits, Loan to Value Ratio (LVR) and Lenders Mortgage Insurance (LMI), choosing the right property type, and understanding the purchase process from pre-approval through to settlement.
1. Understanding your borrowing capacity and budget
Before you start browsing properties or attending open homes, you need to understand how much you can borrow and what you can realistically afford. This is where your pre-approval process begins, and it sets the foundation for your entire property search.
Getting pre-approved for your home loan
Securing a pre-approval is your first major step as a first home buyer. It tells you how much lenders are willing to lend based on your income, expenses, and financial commitments. More importantly, it shows you what you can comfortably afford in monthly repayments without stretching yourself too thin.
A pre-approval also gives you real negotiating power because sellers and agents take you seriously when you have finance ready. It defines the price range you should focus on, which prevents the disappointment of falling for a property that is beyond your reach.
Key insight: Most first home buyers are surprised to learn their borrowing capacity might be quite different from what they can comfortably afford. A good mortgage broker will help you understand both numbers and find the right balance for your financial situation. Use our home equity calculator to explore different scenarios.
Creating your first home buyer budget
When buying your first home, you need to budget for more than just the property price. Our budgeting guide for first home buyers covers all the costs you will encounter.
Your deposit will typically be 5 to 20% of the property price, though government schemes can reduce this significantly. Stamp duty can be substantial, but NSW first home buyers may qualify for full exemptions or concessions. You will also need to cover legal and conveyancing fees (usually $1,500 to $3,000), building and pest inspections (around $400 to $800 combined), and Lenders Mortgage Insurance (LMI) if your deposit is under 20%. Moving costs and immediate repairs are often overlooked but should be factored into your planning from the start.
Understanding your financing options before applying for pre-approval helps you make more informed decisions about loan types, interest rates, and repayment structures.
2. Exploring deposit options and government schemes
One of the biggest challenges for first home buyers is saving enough for a deposit. The good news is that you have more options than you might think. Check our comprehensive guide on first home buyer deposit options to explore all available strategies.
How much deposit do you actually need?
While traditional wisdom says you need a 20% deposit, first home buyer programmes have changed the landscape significantly. Through the Home Guarantee Scheme, you can purchase with just a 5% deposit and no Lenders Mortgage Insurance. The Help to Buy (Shared Equity) Scheme goes even further, making purchases possible with as little as 2% for eligible buyers. Buyers using family guarantors or genuine savings commonly enter the market with 10 to 15%, while a 20%+ deposit remains ideal if you want to avoid LMI and access the best interest rates.
The Home Guarantee Scheme (5% deposit)
The Home Guarantee Scheme is a government programme that allows eligible first home buyers to purchase with just a 5% deposit. It eliminates the need for Lenders Mortgage Insurance, potentially saving you $10,000 to $50,000+ depending on your property price. Despite the lower deposit, you still access competitive interest rates, and you can buy both established homes and new builds within applicable price caps.
To understand if you are eligible and how to apply, read our detailed guides on genuine savings requirements and the benefits and risks of the Home Guarantee Scheme.
Other deposit building strategies
Beyond government schemes, first home buyers can explore several other pathways. The First Home Super Saver Scheme (FHSSS) lets you use your superannuation to build your deposit faster with tax benefits, up to $50,000. A family guarantee allows parents to use their property equity to help you buy without providing cash upfront. Gifts or inheritance from family members can also form part of your deposit with proper documentation for your lender. And for those building savings from scratch, dedicated high-interest accounts help you accumulate genuine savings over the 3+ months that most lenders require.
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3. Maximising NSW first home buyer benefits
As a first home buyer in NSW, you have access to some of Australia's most generous government support programmes. Understanding and maximising these benefits can save you tens of thousands of dollars.
NSW stamp duty savings and exemptions
Stamp duty is typically one of the largest upfront costs when buying property. NSW offers substantial relief for first home buyers through the First Home Buyers Assistance Scheme. Properties up to $800,000 qualify for a full exemption, meaning you pay $0 in stamp duty. Properties between $800,001 and $1,000,000 attract concessional (reduced) rates. On an $800,000 property, this exemption saves you $30,529+ compared to what a regular buyer would pay.
First Home Owner Grant (FHOG)
The NSW First Home Owner Grant provides $10,000 to eligible buyers purchasing or building a new home. It is available for new homes only (not established properties), and the property value must be under $600,000, or $750,000 for land and construction combined. You must be an Australian citizen or permanent resident and cannot have previously owned property in Australia.
Combining multiple benefits
Strategic approach: Smart first home buyers can combine multiple programmes for maximum savings. For example, use the Home Guarantee Scheme (5% deposit) + stamp duty exemption + FHOG on a new property. This could mean purchasing a $750,000 new home with just $37,500 deposit whilst saving over $28,000 in stamp duty and receiving a $10,000 grant. That is over $38,000 in combined benefits.
4. Understanding Loan to Value Ratio and Lenders Mortgage Insurance
Two critical concepts every first home buyer must understand are LVR and LMI. They directly impact your borrowing power, interest rates, and overall purchase costs.
What is Loan to Value Ratio (LVR)?
Your Loan to Value Ratio (LVR) is the percentage of the property value you are borrowing from your lender. An 80% LVR means you have a 20% deposit and is generally considered low risk by lenders. A 90% LVR represents a 10% deposit and typically requires LMI, which is common for first home buyers. A 95% LVR means just a 5% deposit, which is available through the Home Guarantee Scheme without LMI.
Your LVR affects whether you need to pay LMI, the interest rate you are offered (lower LVR often means better rates), your loan approval likelihood, and how much you can borrow overall.
Lenders Mortgage Insurance (LMI) explained
Lenders Mortgage Insurance protects the lender (not you) if you default on your loan. It is required when borrowing more than 80% of the property value. For first home buyers, LMI can cost anywhere from $10,000 to $50,000+ depending on your loan size and deposit.
There are several ways to avoid or reduce LMI. Saving a 20% deposit eliminates the need for it entirely. The Home Guarantee Scheme replaces LMI with a government guarantee. A family member can provide a guarantee using their property equity. And some lenders offer professional LMI waivers for certain occupations such as medical, legal, and accounting professionals.
Use our property deposit calculator to understand how different LVRs and deposits affect your borrowing capacity.
5. Choosing the right property type and location
When purchasing your first home, choosing the right property type and location is just as important as securing the right finance. Learn more in our guide on how to buy the right property as a first home buyer.
Property types to consider
Freestanding houses offer full land ownership, privacy, and complete renovation freedom. They tend to have a higher entry cost but typically deliver stronger long-term capital growth. If you want space, a backyard, and the freedom to modify your home without seeking anyone's approval, a freestanding house is worth considering.
Strata properties such as apartments and townhouses provide a lower entry cost, making them ideal for first home buyers in more expensive suburbs. They often include shared amenities like pools, gyms, and secure access, but come with strata fees (typically $1,000 to $5,000+ annually) and restrictions on what you can renovate.
Purchasing vacant land or land for construction lets you build your home from scratch with access to additional grants for new builds. The finance process is more complex because it involves construction loans with staged drawdowns, and the timeline to move in is longer.
Location considerations
Location, condition, and neighbourhood vibes all matter when choosing your first home. Think about your proximity to work and public transport, because your daily commute directly affects quality of life. School zones are important for families and also influence resale value. Local amenities such as shopping centres, healthcare facilities, and parks add convenience and long-term appeal. Future development and infrastructure projects in the area can increase your property's value over time. And it pays to look at historical price growth trends to understand which suburbs have consistently performed well.
6. Understanding the purchase process
The final key to success as a first home buyer is understanding how the purchase process works. For a detailed walkthrough of purchase methods and valuations, read our guide on property purchase, bank valuation and property types. There are three main ways to buy property in Australia.
Private treaty sales
Private treaty sales are the most common and first home buyer friendly option. You negotiate directly with the seller through the agent, and you can include conditions such as finance approval and building inspection in your offer. You have time to arrange finance and complete due diligence, and in NSW you benefit from a 5 business day cooling-off period after exchange.
Buying at auction
Buying at auction is competitive but can work well for prepared first home buyers. You need strong pre-approval and confirmed borrowing capacity before bidding, and you must complete all inspections beforehand because the contract becomes unconditional the moment the hammer falls. There is no cooling-off period at auction, so thorough preparation is essential.
Off-the-plan purchases
Buying off the plan offers unique opportunities including locking in today's price for a future property and qualifying for the First Home Owner Grant on new properties. The extended settlement period gives you more time to save. However, potential risks include property value changes during construction and possible delays.
The path to settlement
Once your offer is accepted, you move through to settlement. This begins with exchange of contracts where your legal commitment is made and deposit paid. Your lender then completes their valuation and final checks to issue unconditional approval. Before settlement, you conduct a final property inspection to make sure everything is as agreed. On settlement day, the balance is paid and you collect your keys.
Timeline tip: The typical timeline from offer acceptance to settlement is 30 to 90 days for established properties, or 12 to 24 months for off-the-plan purchases. Your mortgage broker will coordinate with your lender to ensure everything stays on track. Understanding how bank valuations work helps you avoid surprises during this stage.
Your complete journey: from pre-approval to home ownership
Understanding these six key areas is essential, but buying your first home is about bringing them all together into a clear strategy. Read our complete first home buyers journey guide to see how all these pieces fit together, from pre-approval to moving day.
Why work with a specialist first home buyer broker?
Navigating government schemes, comparing loan products, and coordinating the purchase process can feel overwhelming. Working with a mortgage broker who specialises in first home buyers makes a real difference.
We compare options across 35+ lenders, including major banks, regional lenders, and non-bank lenders, to find the deal that genuinely suits your situation. We ensure you are maximising every available benefit, from stamp duty exemptions to the Home Guarantee Scheme. We help you understand not just the maximum you can borrow, but what you can comfortably afford month to month. We align pre-approval, property search, and settlement timing so nothing falls through the cracks. And our service is completely free because we are paid by the lender, not by you.
Learn more about our team and experience, or explore our service areas across 220+ Sydney suburbs.
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We guide first home buyers through every stage, from pre-approval to settlement, across all of Sydney and NSW. Book a free consultation to map out your personalised pathway to home ownership.
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Frequently asked questions
How much deposit do I need to buy my first home in NSW?
It depends on the scheme you use. With the Home Guarantee Scheme, you can buy with just 5% deposit and no LMI. The Help to Buy (Shared Equity) Scheme allows purchases with as little as 2%. Without government schemes, most lenders accept 10 to 15% deposits with LMI, or 20%+ to avoid LMI altogether. Your ideal deposit size depends on your financial situation and which schemes you qualify for.
What government grants and schemes are available for first home buyers in NSW?
NSW first home buyers can access several programmes: the stamp duty exemption (saving up to $30,529 on properties up to $800,000), the $10,000 First Home Owner Grant for new homes under $600,000, the Home Guarantee Scheme for 5% deposit purchases, the Help to Buy Scheme for 2% deposit purchases, and the First Home Super Saver Scheme for tax-advantaged deposit saving. Many of these can be combined for maximum benefit.
Should I get pre-approval before looking at properties?
Yes, securing pre-approval before serious property hunting is strongly recommended. It gives you a clear budget, strengthens your position as a buyer, and prevents the disappointment of finding a property you love but cannot finance. Pre-approval typically takes 1 to 2 weeks and is valid for 3 to 6 months depending on your lender.
What is the difference between pre-approval and full approval?
Pre-approval (also called conditional approval) is when a lender reviews your financial situation and agrees in principle to lend you a specific amount. Full (unconditional) approval happens after you find a property and the lender completes their property valuation and final checks. Pre-approval gives you confidence to search, while full approval is the green light to proceed to settlement.
How long does it take to buy your first home from start to finish?
The timeline varies, but a typical first home purchase follows this progression: financial preparation takes 1 to 6 months, pre-approval takes 1 to 2 weeks, property search takes 1 to 6 months, contract exchange and finance finalisation takes 2 to 4 weeks, and settlement takes 30 to 90 days. From serious property hunting to collecting your keys, expect around 3 to 6 months for an established property.
Does it cost anything to use a mortgage broker?
No. Our mortgage broking service is completely free to you. We are paid by the lender when your loan settles, which means you get expert advice, access to 35+ lenders, and end-to-end support at zero cost. There is no catch and no obligation. Book a free consultation to get started.
First home buyer resources and calculators
Ready to dive deeper? Our pre-approval to home ownership guide gives you the complete step-by-step journey, while pathways to home ownership covers all available routes to buying your first home. Use our property deposit calculator to see the maximum property price you can afford based on your deposit, our home equity calculator to estimate equity at different LVRs, and our mortgage repayment calculator to work out how much your home loan repayments could be.
Related resources for first home buyers
Continue building your knowledge with our pre-approval to home ownership guide for step-by-step guidance, our budgeting guide for first home buyers to understand your borrowing capacity, our Home Guarantee Scheme guide for 5% deposit purchases with no LMI, our NSW stamp duty guide to save up to $30,529, and our deposit options guide to explore guarantor support, government schemes, and LMI strategies.
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