The First Home Buyer's Complete Guide to Mortgages in 2026

Buying your first home is one of the biggest financial decisions you'll ever make. It's also one of the most confusing - between deposit requirements, government schemes, interest rates, and lender jargon, it's easy to feel overwhelmed before you've even started.

This guide cuts through the noise. We'll walk you through every step of the process - from understanding how much you can borrow to picking up your keys on settlement day. By the end, you'll know exactly what to do next.

Your borrowing power (or borrowing capacity) is the maximum amount a lender will lend you, based on your income, expenses, existing debts, and the lender's own policies. It's not a fixed number - it varies significantly between lenders.

The key factors that affect your borrowing power:

• ✓Gross income: Your salary, rental income, investment income, and any other regular income. Lenders typically use 80–100% of your base salary and may discount other income types.
• ✓Living expenses: Lenders use the Household Expenditure Measure (HEM) as a benchmark, but will also assess your actual declared expenses. Higher expenses = lower borrowing power.
• ✓Existing debts: Car loans, credit cards, personal loans, and HECS/HELP debt all reduce your borrowing power. Even unused credit card limits count - lenders assume you could max them out.
• ✓Number of dependants: Each dependant reduces your borrowing power by approximately $20,000–$30,000, depending on the lender.
• ✓Employment type: PAYG employees are assessed most favourably. Casual, contract, and self-employed borrowers may be assessed differently - but there are lenders who specialise in each.

The best way to know your actual borrowing power is to speak with a broker. We'll run your numbers across multiple lenders and give you a realistic figure - not just a calculator estimate.

The minimum deposit is 5% of the purchase price for most lenders. However, the magic number is 20% - because once your deposit reaches 20%, you avoid Lenders Mortgage Insurance (LMI).

What is LMI? Lenders Mortgage Insurance protects the lender (not you) if you default on your loan. It's a one-off cost that can range from a few thousand to tens of thousands of dollars, depending on your loan size and LVR. It can usually be capitalised (added to your loan balance).

The Australian government offers several programs to help first home buyers get into the market sooner. Here's a summary of what's available in 2026:

Pre-approval (also called conditional approval or approval in principle) is a lender's indication that they're willing to lend you up to a certain amount, subject to final assessment. It's not a guarantee of lending, but it's an essential step before making offers on properties.

Why you need pre-approval:

• ✓Most real estate agents and vendors expect buyers to have pre-approval before making an offer.
• ✓It gives you a clear budget so you don't waste time looking at properties you can't afford.
• ✓It speeds up the formal approval process once your offer is accepted.
• ✓It demonstrates to vendors that you're a serious, qualified buyer.

Pre-approval typically lasts 3–6 months. We'll help you get pre-approval from the right lender - one whose policies suit your situation - so you can search for your home with confidence.

Lenders assess your application across five key areas. Understanding these helps you present your best case - and gives you time to address any weaknesses before you apply.

If you're ready to start your first home buyer journey, here's what to do right now: