5 Common Home Loan Mistakes First-Home Buyers Should Avoid

Buying your first home is an exciting life moment, but it can also be a minefield of decisions and financial commitments. Without the right guidance, it’s easy to make mistakes that can delay your property goals or cost you more than expected. The good news is that most of these mistakes are preventable with a bit of knowledge and preparation. Here are five common home loan pitfalls that first-time buyers often fall into and how you can steer clear of them.

1. Skipping Pre-Approval Before House Hunting

It’s tempting to jump straight into property inspections, but house hunting without pre-approval can backfire. Without knowing how much you can actually borrow, you might spend time looking at homes outside your budget, or worse, miss out on a property because another buyer is ready to go. Pre-approval gives you a clear idea of what you can afford and shows sellers you're a serious buyer. It also puts you in a stronger position to negotiate. Since pre-approval typically lasts 3–6 months, it’s wise to time your search to fall within that window.

2. Borrowing the Maximum Amount You’re Offered

Just because a bank is willing to lend you a certain amount doesn’t mean you should borrow it. Taking out the maximum loan might make you “house rich, cash poor,” leaving little room in your budget for changes in interest rates or everyday expenses. It’s important to consider all the ongoing costs of homeownership, including council rates, maintenance, repairs, and insurance. Always create a realistic budget that includes these additional expenses and leaves you with a buffer for unexpected costs.

3. Underestimating Upfront Costs

Many first-home buyers focus solely on saving a deposit and forget about the extra costs involved in purchasing a property. Expenses like stamp duty, legal and conveyancing fees, building and pest inspections, and lenders mortgage insurance (if your deposit is under 20%) can add up quickly. Without planning for these upfront costs, you may struggle to complete the purchase or find yourself financially stretched from day one. Take the time to understand the total costs involved and explore government grants or stamp duty concessions that might apply to you.

4. Making Major Financial Changes Before Settlement

Even after receiving conditional approval, lenders continue to assess your financial situation until settlement. Making significant changes - like taking out a car loan, applying for a new credit card, switching jobs, or making large purchases - can alter your borrowing power and put your loan at risk. It’s best to keep your finances steady and avoid new debts until your loan is fully approved and settled. If you’re unsure whether something might affect your application, speak to your mortgage broker first.

5. Choosing a Loan Based Solely on Interest Rate

While the interest rate is a major factor in your loan decision, it’s not the only one that matters. Some home loans with attractive rates come with restrictions or lack features that could actually cost you more in the long run. For instance, a slightly higher rate loan that includes an offset account, allows extra repayments, and offers flexible terms may save you more over time. Comparing the full loan package (including fees, features, and flexibility) is key to making a smart decision. A broker can help you weigh up your options across multiple lenders to find the right fit.

Final Thoughts: Buy with Confidence

Buying your first home doesn’t need to be stressful. By avoiding these common mistakes, you’ll be in a stronger position to get approved, choose a loan that suits your financial goals, and move into your new home with confidence. Remember to plan beyond the deposit, avoid financial surprises before settlement, and look beyond the headline interest rate. And don’t hesitate to ask for expert guidance along the way.

How We Help First-Home Buyers

We offer personalised home loan consultations to assess your borrowing power, compare lenders, and help you get pre-approved faster. From navigating government incentives to understanding loan features, we’ll make sure your first-home journey is smooth and informed from start to finish. Thinking about buying your first home? Get in touch, we’d love to help you take the next step.