What Makes a First Home Buyer Loan Different?
If you're buying your first home in Australia, you're not just another borrower — you're in a unique position with access to benefits that existing homeowners and investors simply can't get.
Government schemes exclusive to first home buyers. Programs like the First Home Guarantee, First Home Owner Grant, and Help to Buy are specifically designed to help you get into the market sooner. These can mean the difference between needing a 20% deposit and needing just 2–5%.
Lender-specific first home buyer packages. Several lenders offer dedicated first home buyer products with reduced fees, lower rates, or waived application costs. These aren't always advertised — a mortgage broker who works with first home buyers regularly will know which lenders are running the best deals.
Stamp duty concessions. Every state and territory offers stamp duty exemptions or discounts for first home buyers. In NSW, for example, first home buyers pay zero stamp duty on properties up to $800,000. In Victoria, the threshold is $600,000. These savings can be worth $15,000–$30,000 depending on your state and purchase price.
Check the grants and schemes page for the full breakdown of what's available in your state.
How Much Can You Borrow as a First Home Buyer?
The rough rule of thumb is that lenders will allow you to borrow around 6 times your annual household income — but this is only a starting point. Your actual borrowing power depends on several factors that lenders assess carefully.
Income. Both your base salary and any regular overtime, bonuses, or commission are considered. If you're self-employed, lenders typically want to see two years of tax returns and financial statements.
Existing debts — including HECS. This is where many first home buyers get caught off guard. Your HECS/HELP debt repayment is counted as a monthly liability, reducing what you can borrow. A $40,000 HECS debt might reduce your borrowing power by $30,000–$50,000 depending on the lender. Credit cards also reduce borrowing power — even if you pay the balance in full each month, lenders count the full credit limit as a potential liability.
Living expenses. Lenders use the Household Expenditure Measure (HEM) as a baseline, but they'll also look at your actual bank statements. If your spending is significantly higher than HEM, the higher figure is used.
Dependants. Each dependant reduces your borrowing capacity as lenders factor in the cost of supporting children or other family members.
See your real borrowing power in 60 seconds
Our free calculator factors in your income, debts, and living expenses to give you an accurate estimate — not just a rough multiple.
What Deposit Do You Need?
The "you need 20% deposit" advice is outdated for first home buyers. Here's what you actually need:
- 20% deposit — avoids Lenders Mortgage Insurance (LMI) entirely and gets you the best interest rates. On a $600,000 property, that's $120,000
- 5% deposit — the minimum with the First Home Guarantee. The government guarantees the rest up to 20%, so you pay no LMI. On a $600,000 property, that's just $30,000
- 2% deposit — possible through the Help to Buy shared equity scheme, where the government contributes up to 40% of the purchase price
- 0% deposit — possible with a guarantor home loan, where a parent uses their property as additional security
The real question isn't "how much deposit do I need?" — it's "how much can I save vs how much will LMI cost?" If LMI on your purchase would be $12,000 but saving the extra deposit would take you another two years — during which property prices might rise $40,000 — paying the LMI and buying sooner could actually save you money.
Use the LMI calculator to see exactly what LMI would cost for your situation, and read our guide on how to save for a house deposit for practical strategies.
First home buyer loans 2026 — by deposit size and scheme
There isn't one "best" first home buyer loan in Australia — the right product depends on how much deposit you've actually saved. After the RBA's 5 May 2026 cash-rate move took the target to 4.35%, the spread between the cheapest first home buyer pathway and the most expensive has widened to almost 1.8 percentage points. A 2% deposit through a state scheme costs very different money than 5% through the federal guarantee, which in turn looks nothing like a standard 20%-deposit loan at a Big Four. Here's how the five realistic deposit tiers compare today.
2% deposit — state low-deposit lenders and the Family Home Guarantee
If you can only stretch to a 2% deposit, your options are narrow and almost entirely state-government-backed. National bank lenders won't write a sub-5% loan to a first home buyer without a guarantor.
- Keystart (Western Australia only). A WA-government lender that accepts deposits as low as 2% with no LMI. There is no national equivalent — Keystart only lends on properties in WA. Rates sit around 7.60% variable in May 2026 because Keystart funds itself from the wholesale market rather than retail deposits. Income caps apply ($155,000 single / $228,000 couple in metro Perth as of April 2026). The intent is that you refinance to a mainstream lender within 2–4 years once you have equity. Full Keystart guide.
- HomeStart Finance (South Australia only). The SA equivalent of Keystart. Accepts deposits from 2% (Graduate Loan for Cert III+ holders, police, firefighters, TAFE graduates) or 5% standard, no LMI on the headline product. Rates run roughly 6.40–6.95% variable. SA properties only.
- Family Home Guarantee (federal, single parents and eligible single guardians). Lets a single parent buy with a 2% deposit through a panel of participating lenders, with the government guaranteeing the gap to 20%. No LMI. Rates are the participating lender's standard FHB rate — currently around 5.84–6.15% variable across the panel — which makes this the cheapest 2%-deposit pathway in the country if you qualify. Family Home Guarantee guide.
If you're outside WA and SA and you're not a single parent, a true 2% deposit purchase generally isn't available without a guarantor structure.
5% deposit — the First Home Guarantee and Regional Guarantee
This is the sweet spot for most first home buyers in 2026, and it's where the SERP-leading bank pages all push you. With a 5% deposit and a federal guarantee, you get a mainstream bank loan at a mainstream bank rate — without paying LMI.
- First Home Guarantee (Australian Government 5% Deposit Scheme). Federal scheme administered by Housing Australia. The government guarantees up to 15% of the property's value, so you put down 5% and pay no LMI. Property price caps apply by city (Sydney $1.5M, Melbourne/Brisbane $950K, Perth $850K, Adelaide $900K, Hobart/Canberra around $700–$750K). As of 1 October 2025, the scheme has no income caps and unlimited places — eligibility is now just citizenship/PR, FHB status, and the property cap. Expect 5.84–6.15% variable across the panel post-5-May. Full 2026 grants and schemes guide.
- Regional First Home Buyer Guarantee. Same mechanics as the FHBG but specifically for buyers in regional postcodes. Slightly more generous price caps in some regions. Same lender panel.
5% deposit with LMI — standard bank low-deposit loans
If for any reason you don't use a guarantee — over the property cap, or you specifically want a non-panel lender — you can still buy with 5% from a mainstream bank, but you'll wear Lenders Mortgage Insurance.
On a typical $650,000 purchase with a 5% deposit, LMI runs between $20,000 and $30,000 depending on the lender. It's a one-off premium, usually capitalised onto the loan. Rates sit in the same 5.84–6.55% variable band as the FHBG products, but the all-in cost is materially worse because you're financing the LMI premium for 30 years.
The straightforward maths: if you qualify for the FHBG, take it. The only scenario where a standard 5%-deposit-plus-LMI loan beats the guarantee is when you're buying above the FHBG price cap.
20% deposit — standard bank loans, full feature access
If you've managed to save the full 20% deposit, you get the cheapest possible loan on the market. No LMI, full lender choice, and access to every feature that matters long-term:
- Variable rates of 5.84–6.30% across the major and second-tier banks, with the sharpest digital lenders pricing closer to 5.74–5.94%
- 100% offset accounts at standard package rates (read our offset account guide)
- Redraw, fixed-rate splits, and the freedom to refinance to a sharper rate at any time without LMI re-assessment
At a 20% deposit you're indistinguishable from any other low-risk borrower in the lender's book. This is why getting from 15% to 20% — even if it means delaying the purchase by 6 months — sometimes pencils out better than buying immediately with LMI.
Guarantor loans — 0% deposit with parent equity
If your parents own a property with usable equity, a guarantor home loan can let you buy with no deposit at all. The structure: your parents pledge a portion of their property as additional security, which the bank treats as your missing deposit. You get a mainstream bank loan at a mainstream rate (5.94–6.30% variable in May 2026), no LMI, and access to the same features as a 20%-deposit borrower.
The risks are real and sit with the guarantor: if you default, the bank can pursue their property to recover the guaranteed portion. Most lenders cap the guarantee at the LMI-avoidance amount (typically 20% of the purchase price) rather than the full loan, so the parents' exposure is bounded — but it's still meaningful. The guarantee is usually released after 3–5 years once your loan balance has dropped below 80% LVR.
Government Help for First Home Buyers in 2026
Australia has some of the most generous first home buyer support in the world. Here's what's available:
First Home Owner Grant (FHOG). A one-off cash payment from your state government — typically $10,000–$30,000 depending on where you buy. It's usually only available for new builds or substantially renovated properties, not established homes. Each state has different amounts, property value caps, and eligibility rules.
First Home Guarantee (rebranded as the 5% Deposit Scheme; formerly FHLDS). The federal government guarantees up to 15% of your property's value, letting you buy with just a 5% deposit and no LMI. Since 1 October 2025 there are no income caps and unlimited places — only property price caps still apply by location.
Help to Buy. The government contributes up to 30% of an existing home's value (or 40% for a new build), meaning you only need a 2% deposit. You buy back the government's share over time or when you sell.
Stamp duty concessions. Every state offers first home buyers either a full stamp duty exemption or a significant discount. This alone can save you $10,000–$30,000+ depending on your state and property price.
First Home Super Saver Scheme (FHSSS). You can withdraw voluntary super contributions (up to $50,000) to use as a deposit. Because super contributions are taxed at just 15% instead of your marginal rate, this is effectively a tax-advantaged savings strategy. Read our detailed FHSSS guide for how it works.
For the full breakdown of what's available in your state — including current dollar amounts, property caps, and eligibility — visit the grants and schemes page.
What Lenders Look for When Assessing Your Application
Understanding what lenders assess helps you prepare — and avoid surprises that delay your approval.
Stable employment. Lenders want to see at least 6 months in your current role and ideally 2+ years in your industry. If you're on probation, recently changed jobs, or work casually, some lenders won't consider your income. Others will — this is where lender selection matters.
Clean credit history. Any defaults, late payments, or court judgments in the last 5 years will affect your application. Even a missed phone bill payment can appear on your credit report. Check your credit file for free through Equifax or illion before applying.
Genuine savings. Most lenders want to see 3+ months of consistent saving in your bank account. This demonstrates financial discipline and shows you can manage money. Gift deposits from parents are accepted, but you may need a signed letter confirming the money is a gift, not a loan.
Low debt-to-income ratio. If a large portion of your income goes toward existing debt repayments, your borrowing capacity drops. Before applying, consider paying off personal loans and reducing credit card limits — even closing cards you don't use.
Living expenses. Lenders will review 3 months of bank statements. Excessive spending on things like gambling, buy-now-pay-later services, or luxury items can raise red flags. This doesn't mean you need to live frugally forever — but cleaning up your spending for 3–6 months before applying makes a real difference.
How to Get Approved on Your First Try
Loan rejections stay on your credit file and make the next application harder. Here's how to maximise your chances of approval the first time:
1. Get pre-approval before house hunting. Pre-approval tells you exactly how much you can borrow and shows sellers you're a serious buyer. It also catches any issues early — before you've found a property and are under pressure.
2. Use a mortgage broker. Brokers compare 30+ lenders and know which ones suit your specific situation — whether you're self-employed, have HECS debt, work casually, or are using the First Home Guarantee. They handle the paperwork, chase up the lender, and their service is completely free to you (they're paid a commission by the lender).
3. Don't apply to multiple lenders yourself. Each loan application creates a credit enquiry on your file. Multiple enquiries in a short period signal to lenders that you've been rejected elsewhere — even if you were just shopping around. A broker submits one application to the right lender, avoiding this problem entirely.
4. Have your documents ready. Lenders will ask for: recent payslips (last 2–3), tax returns (last 2 years if self-employed), bank statements (last 3 months), photo ID, and details of any debts. Having these organised before you apply speeds up the process significantly.
5. Know your numbers. Use our borrowing calculator to understand your position, check the LMI calculator to factor in insurance costs, and review current interest rates so you know what repayments to expect.
Get matched with a first home buyer specialist broker
A good broker makes the difference between approval and rejection — especially for first home buyers navigating government schemes and lender requirements for the first time.
Frequently Asked Questions
What is the easiest home loan to get for first home buyers?
Loans backed by the First Home Guarantee are often the most accessible — you only need a 5% deposit, there's no LMI, and many major and non-major lenders participate in the scheme. Beyond the guarantee, some lenders have dedicated first home buyer products with reduced documentation requirements and lower fees. A mortgage broker can match you with the lender most likely to approve your application based on your specific circumstances.
Can I get a home loan with a 5% deposit?
Yes. Through the First Home Guarantee, you can buy with just 5% deposit and no LMI — the government guarantees the gap up to 20%. Without the guarantee, a 5% deposit is still possible with most lenders, but you'll pay Lenders Mortgage Insurance which typically costs $10,000–$25,000 depending on the loan amount. A guarantor home loan is another option — a family member uses their property as security so you avoid LMI even with a small deposit.
How much do first home buyers need to earn to get a loan?
It depends on the property price, your existing debts, and your living expenses. As a rough guide, a $500,000 loan typically requires $80,000–$100,000 in household income, while a $700,000 loan might need $110,000–$140,000. HECS debt, credit card limits, and car loans all reduce your borrowing capacity. Use our free borrowing calculator to see what you can borrow based on your actual income and debts.
Should I use a mortgage broker as a first home buyer?
Yes — and it's especially valuable for first home buyers. Brokers compare 30+ lenders to find the best rate and product for your situation, handle all the paperwork and lender communication, and know which lenders work best with government schemes like the First Home Guarantee. Their service is completely free to you — brokers are paid a commission by the lender, not by the borrower. Most importantly, they submit one targeted application to the right lender, avoiding multiple credit enquiries that can hurt your credit score.
