First Home Buyer Mistakes That Can Affect Loan Approval
First home buyers often prepare carefully for a loan application, but some financial commitments can affect borrowing capacity differently from what buyers expect.
For anyone applying for a first home buyer loan in Australia, understanding how lenders assess credit limits, BNPL commitments, savings, employment and other liabilities can help avoid preventable delays. These are some common home loan mistakes in Australia worth checking before lodging an application.
Mistake 1: Keeping High Unused Credit Card Limits
What the buyer thought: “I barely use the card, so the limit shouldn’t matter.”
What the lender may see: Credit card limits can affect borrowing capacity even when the balance is zero. Lenders consider the available limit because it represents the credit the borrower could potentially use. The exact servicing treatment varies by lender. Before applying, review your credit cards and decide whether the limits still suit your needs. Reducing a limit or closing an unused account may affect your assessed commitments, but it does not guarantee first home buyer loan approval.
This is why a high credit card limit in a home loan application can matter even when the card is paid off each month.
Before applying, review whether you still need each card and its current limit. Reducing limits or closing genuinely unused accounts may improve borrowing capacity, but allow time for the change to be processed and reflected in your records.
Mistake 2: Taking On New BNPL Commitments Before Applying
What the buyer thought: “It’s interest-free, so it shouldn’t affect my home loan.”
What the lender may see: BNPL is now regulated credit in Australia. Depending on the provider and arrangement, BNPL information may appear on a credit report, and lenders may also consider BNPL commitments or transactions when assessing the applicant’s overall financial position.
The BNPL home loan impact depends on factors such as active commitments, repayments, spending patterns, and individual lender policy.
Before applying, make sure all BNPL commitments are accurately disclosed and consider whether unused accounts are still necessary. Avoid taking on unnecessary new credit immediately before a home loan application.
Mistake 3: Treating the Deposit as the Only Upfront Cost
What the buyer thought: “I’ve saved my deposit, so I’m ready to buy.”
What the buyer also needs to consider: Having a deposit does not necessarily mean the buyer is financially ready for loan approval. Lenders may also consider the borrower’s overall financial position, including available savings, existing commitments and the funds required to cover other upfront buying costs.These vary by state, property, and borrower.
LMI may apply where the loan-to-value ratio is above 80%, depending on the lender and loan structure. However, eligible first home buyers in Australia may be able to use the Australian Government 5% Deposit Scheme to purchase with a minimum 5% deposit without paying LMI.
State concessions matter too. For example, eligible NSW first-home buyers can receive a full transfer-duty exemption on new or existing homes valued at $800,000 or less.
A first-home buyer home loan plan should therefore consider the deposit, other buying costs, existing commitments and an appropriate financial buffer, rather than focusing only on the deposit percentage.
Mistake 4: Assuming a Job Change Will Be Treated the Same by Every Lender
What the buyer thought: “My new salary is higher, so my borrowing capacity should automatically improve.”
What the lender may assess: A recent job change can lead to additional checks around employment type, income, probation, employment history, and whether the income is expected to continue. Lender policies vary, and being on probation does not automatically mean a home loan application will be declined.
If you have recently changed jobs, discuss your employment position before lodging the application so the lender’s requirements can be checked first.
These home loan application tips in Australia are particularly relevant when income, employment, or credit commitments have recently changed.
Small changes before an application can sometimes make a meaningful difference. The key is to review the position before the lender begins its assessment.
How OM Financials Can Help First-Time Home Buyers
Shyam Maggo and the OM Financials team help first-home buyers review their financial position before an application is lodged, including income, existing liabilities, credit limits and available deposit funds.
As an OM Financials mortgage broker service with access to 50+ lenders, the team can compare suitable lender policies based on the buyer’s circumstances rather than relying on one lender’s criteria.
For buyers looking for a mortgage broker in Australia, OM Financials can assist with the home loan approval process from application preparation through to settlement.
Book your free strategy session and also visit OM Financials to learn more. Follow OM Financials on Instagram, Facebook, and LinkedIn.
Frequently Asked Questions
Q: How much should a first-home buyer save beyond the deposit?
Answer: It depends on the property, state, and available first-home buyer concessions. Buyers should allow for applicable transfer duty, legal or conveyancing fees, inspections, moving costs and an appropriate post-purchase buffer. Eligible buyers may also reduce upfront costs through the Australian Government 5% Deposit Scheme and state-based concessions.
Q: Can I apply for a home loan while on probation at a new job?
Answer: Potentially. Lender policies vary. Some lenders may accept applicants on probation depending on employment type, income, employment history, and the overall application. Being on probation does not automatically mean the application will be declined.
Q: Do BNPL accounts like Afterpay appear on my credit report?
Answer: They may. BNPL contracts have been regulated under the National Credit Code since 10 June 2025, and OAIC states that BNPL arrangements may appear on a credit report. Reporting practices can vary by provider and arrangement. Lenders may also consider BNPL commitments as part of their broader assessment.