Buying your first home in Australia is exciting—but let’s be honest, it can also feel overwhelming. Between comparing lenders, working out deposits, preparing documents, and trying to understand eligibility rules, it’s easy to miss key steps that affect your approval chances.
The good news? You can dramatically boost your home loan approval simply by being prepared. This long-form guide gives you a complete, easy-to-follow what first-time buyers need in Australia, written in a conversational style to make your journey simpler, clearer, and more confident.
Let’s dive in.
The Ultimate Home Loan Checklist to Boost Approval – What First-Time Buyers Need in Australia
1. Understanding What First-Time Buyers Need in Australia
Before you start house hunting, the first step is to understand what lenders look for. Banks and lenders aren’t just checking if you want a loan—they’re assessing whether you can comfortably repay it.
Here’s what they focus on:
- Stable income and employment history
- A strong credit profile
- A reasonable deposit
- Evidence of genuine savings
- Low existing debt
- Clean bank statements
- Responsible financial behaviour
This means the more prepared you are in these areas, the quicker and easier your approval becomes. That’s why having a complete home loan checklist is essential.
2. Check Your Borrowing Capacity First
A surprising number of first-home buyers skip this step, but it’s one of the most important.
Your borrowing capacity determines how much a lender is willing to lend you. It depends on:
- Your income
- The number of dependents you support
- Existing debts
- Monthly expenses
- Deposit size
- Type of loan
- Current interest rates
Tools like borrowing power calculators can give a rough estimate, but a mortgage broker can run a full assessment using lender guidelines.
Knowing your borrowing capacity helps you:
- Avoid falling in love with a property you can’t afford
- Speed up your approval
- Shortlist the right lenders
- Plan your budget accurately
3. Build a Strong Deposit (10%–20% Recommended)
While some programs allow you to get in with a 2%–5% deposit, most lenders prefer a 10%–20% deposit.
A larger deposit benefits you because:
- You borrow less
- You pay lower interest over time
- You reduce or avoid Lenders Mortgage Insurance (LMI)
- You look financially responsible to lenders
If you’re struggling to save fast enough, consider:
- First Home Guarantee (no LMI with 5% deposit)
- Family Home Guarantee (2% deposit for single parents)
- First Home Super Saver Scheme (save through super)
- Guarantor home loan options
A higher deposit is one of the strongest signals of financial health, making lenders more comfortable approving your loan.
4. Improve Your Credit Score Before Applying
Your credit score is one of the biggest factors lenders examine. A strong score not only boosts approval chances but also helps you secure better interest rates.
Steps to improve your credit score:
- Pay all bills on time
- Avoid late payments or overdrafts
- Reduce credit card limits
- Pay off personal loans or BNPL debt
- Avoid applying for multiple credit products
- Keep your bank account in good order
You can check your credit score for free through:
- Equifax
- Experian
- illion
If there are errors, request corrections immediately.
5. Reduce or Clear Existing Debts
Lenders calculate something called your DTI—Debt-to-Income ratio. The more debt you have, the lower your borrowing power becomes.
Common debts first-time buyers should clear or reduce include:
- Credit cards
- Personal loans
- Buy Now Pay Later (BNPL)
- Car loans
- Payday loans
- HECS/HELP (if possible)
Even unused credit limits can affect you. For example, a $10,000 unused credit card limit still counts as debt in the eyes of a lender.
Paying down debts is one of the fastest ways to improve borrowing power and approval odds.
6. Prepare Your Document Checklist
Being organised with your documents makes the approval process smooth and fast.
You will need:
Identity Documents
- Passport or driver’s licence
- Medicare card
- Visa if applicable
Income Records
- Last 3–6 months’ payslips
- Most recent tax returns
- Employment contract (if required)
- Group certificate
Bank Statements
- Last 3–6 months showing savings and expenses
- Credit card statements
- Statements of any loans
Savings Evidence
- Term deposit or savings account history
- Proof of genuine savings
Other Required Documents
- Rental ledger (if you’re renting)
- Gift letter (if receiving money from family)
- Statutory declarations (if needed)
The more complete your documents are, the faster a lender can process your application.
7. Prove Genuine Savings
Most lenders require genuine savings, meaning money you’ve personally saved over time—not just gifted funds.
Examples of genuine savings include:
- Money saved for 3–6 months
- Regular deposits into a savings account
- Term deposits
- Shares or investments held for months
- Salary credits going into savings
Genuine savings show lenders that you’re financially disciplined, which boosts approval confidence.
8. Tighten Your Spending and Bank Behaviour
Lenders now closely analyse your bank statements, especially the last 3–6 months. They check your spending habits to see if you can manage the loan responsibly.
You should:
- Cut unnecessary spending
- Reduce eating out
- Lower entertainment expenses
- Avoid gambling or cash withdrawals
- Stop using BNPL apps
- Avoid overdrafts
- Maintain a stable account balance
Good financial behaviour in the months before applying can significantly improve your approval chances.
9. Compare Lenders and Choose the Right Home Loan
Not every lender is right for first-time buyers. You need to compare options to find the best fit.
Key things to compare:
- Interest rates
- Loan features (offset account, redraw facility, etc.)
- Fees and charges
- Deposit requirements
- LMI rules
- Eligibility for government schemes
- Fixed vs variable options
A mortgage broker can compare dozens of lenders for you and match you with the best option for your financial situation.
10. Use Government Grants and Schemes
Australia offers several first-home buyer incentives to make entering the market easier.
Common grants and schemes:
✔ First Home Owner Grant (FHOG)
For new homes (varies by state).
✔ First Home Guarantee (FHG)
Buy with 5% deposit and no LMI.
✔ Regional First Home Buyer Guarantee
5% deposit for regional properties.
✔ Family Home Guarantee
Single parents can buy with 2% deposit.
✔ First Home Super Saver Scheme (FHSSS)
Withdraw extra super contributions for your deposit.
✔ Stamp Duty Concessions/Exemptions
Save thousands depending on your state.
Using these schemes can help you get approved sooner and with less upfront cost.
11. Get Home Loan Pre-Approval
A pre-approval is a lender’s indication of how much you can borrow.
Benefits include:
- You know your budget
- Real estate agents take you seriously
- Sellers trust your offer more
- You avoid wasting time on properties outside your range
- You secure your position in competitive markets
Pre-approvals usually last 60–90 days.
12. Avoid These Common First-Time Buyer Mistakes
Many Aussies unintentionally hurt their chances by:
- Applying without checking credit score
- Spending too much before applying
- Using too many BNPL services
- Making multiple loan applications
- Not comparing lenders
- Forgetting hidden costs (stamp duty, inspections, insurance)
- Borrowing at the maximum limit
- Not having buffers or emergency savings
Avoiding these mistakes instantly strengthens your application.
13. Work With a Mortgage Broker (Recommended)
Many first-home buyers find the loan process complex—but a mortgage broker makes it easier.
Benefits of using a broker:
- Access to 30–60 lenders
- Compare rates and features easily
- Help with documents
- Explain your borrowing power
- Improve approval chances
- No or low cost to you
- Help with grants and incentives
A broker becomes your guide throughout the entire journey.
Conclusion
Buying your first home in Australia doesn’t have to be stressful. With the right preparation, strong financial habits, and a solid understanding of the home loan process, you can dramatically boost your approval chances and step confidently into the property market.
By following this complete home loan checklist for first-time buyers, you’ll streamline the process, avoid costly mistakes, and position yourself as a strong, low-risk borrower in the eyes of lenders.