First Home Buyer Advice: What Not to Do Before You Apply

Buying your first home together means making financial decisions that affect both of you for years.

The couples who move through the purchase process with confidence are usually the ones who spent time understanding how lenders assess applications, what deposit options genuinely exist, and which government schemes apply to their situation. The ones who struggle often made assumptions about affordability, missed eligibility windows, or prepared their finances in isolation without considering how a lender would view the combined position.

This article walks through the decisions that matter most when you're preparing to apply for your first home loan as a couple, with specific examples and context for Melbourne buyers and those purchasing across Australia.

How Much Can You Actually Borrow as a Couple?

Your borrowing capacity as a couple depends on your combined income, existing debts, living expenses, and the deposit you have available. Lenders assess your capacity by calculating how much you can comfortably repay each month after covering your regular commitments. If one of you has a car loan or a personal loan, that repayment reduces how much the lender will approve, even if the other person has no debt at all.

Consider a couple in Melbourne with a combined pre-tax income of $140,000. One partner earns $85,000 and has no debt. The other earns $55,000 and has a car loan with monthly repayments of $650. The lender will factor in that $650 commitment when calculating borrowing capacity for both of you. Depending on other expenses and the interest rate buffer the lender applies, that single car loan could reduce the borrowing capacity by $120,000 or more. In this scenario, paying out the car loan before applying, or timing the application for after the car loan ends, can directly increase what you can borrow together.

If you're not sure where your combined income and commitments sit, a borrowing capacity calculator can give you a starting point before a formal assessment.

What Deposit Do You Need and Where Can It Come From?

Most lenders require a deposit of at least 5% of the purchase price when you're using the Australian Government 5% Deposit Scheme. Outside that scheme, a 10% deposit is more common for first home buyers, though some lenders will accept 5% with Lenders Mortgage Insurance. A 20% deposit removes the need for LMI entirely, but that's not always realistic for couples buying in Melbourne or other capital cities.

Your deposit can come from genuine savings, which means funds you've accumulated over at least three months in your own accounts. It can also include a gift from a parent or family member, though lenders will require a signed declaration confirming the funds are a genuine gift and not a loan. First home super saver scheme withdrawals count toward your deposit as well, provided you've met the ATO requirements and obtained a release authority before signing a contract.

One thing that catches couples off guard is the requirement for genuine savings when one partner is contributing most of the deposit. If one of you has $40,000 saved and the other has $8,000, the lender will assess whether the combined deposit meets their genuine savings threshold, which varies by lender. Some will accept the higher balance as evidence of savings discipline. Others will want to see that both applicants have contributed consistently to savings over time.

Which Government Schemes Apply to You?

The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase with a 5% deposit without paying LMI. The scheme has no income cap and is available to couples purchasing a home they'll live in. For Melbourne buyers, the price cap depends on whether you're buying in a capital city or regional area. For metropolitan Melbourne, the cap is $950,000. For regional Victoria, it's $650,000.

You can access the scheme through a participating lender, and it can be used alongside state-based concessions. In Victoria, that means you can combine the 5% deposit scheme with the first home buyer stamp duty exemption or concession. The exemption applies in full to properties valued up to $600,000, with a sliding concession available for homes between $600,001 and $750,000.

The Victorian first home owner grant of $10,000 applies only to new homes valued up to $750,000, not to established homes. If you're buying an established home in Melbourne's inner or middle suburbs, you won't qualify for the grant, but you can still access the stamp duty concession and the 5% deposit scheme provided you meet the eligibility criteria for each.

What Lenders Actually Assess When You Apply as a Couple

Lenders assess your combined income, your combined liabilities, and your combined living expenses. They don't assess each of you separately and then add the results together. That distinction matters because one partner's spending or debt affects the assessment for both of you.

If one of you regularly uses buy now, pay later services or has a credit card with a $10,000 limit, the lender will assume that limit could be fully drawn at any time, even if the current balance is zero. That assumption reduces your borrowing capacity as a couple. Closing unused credit accounts or reducing credit limits before you apply can materially increase what you're approved for.

Lenders also look at how you manage money together. If you're applying for a joint loan but maintain completely separate finances with no shared bills or joint accounts, some lenders may ask for evidence that you've been managing shared financial commitments. Opening a joint savings account and using it to save your deposit together can strengthen your application in that situation.

Fixed or Variable Rate for Your First Home Loan?

Choosing between a fixed rate and a variable rate depends on whether you value certainty in your repayments or flexibility in how you manage the loan. A fixed rate locks in your interest rate for a set period, typically one to five years, which makes budgeting easier. A variable rate moves with the market and usually allows you to make extra repayments without penalty, access an offset account, or redraw funds if your lender offers that feature.

In our experience, couples buying their first home together often prefer a variable rate or a split loan structure where part of the loan is fixed and part is variable. A split structure gives you some repayment certainty while keeping the flexibility to pay extra on the variable portion if your income increases or you receive a windfall.

If you're considering a fixed rate, check what happens when the fixed period ends. Some lenders automatically move you to a higher variable rate unless you proactively refinance or negotiate. That difference can be significant, particularly if you fixed during a period of lower rates and the standard variable rate has since increased.

Should You Get Pre-Approval Before You Start Looking?

Pre-approval gives you a conditional commitment from a lender before you make an offer. It's not a guarantee, because the lender will still need to value the property and review your circumstances again at settlement, but it does confirm how much you can borrow based on your current income and commitments.

For couples buying in Melbourne, particularly in suburbs where properties move quickly, having pre-approval means you can make an offer with confidence. It also allows you to set a clear budget before you start attending inspections, which helps you avoid falling for a home that's outside your price range.

Pre-approval is typically valid for three to six months. If your circumstances change during that time, such as one of you changing jobs or taking on new debt, you'll need to update the lender before settlement. That's not unusual, but it does mean you should avoid making major financial changes between pre-approval and settlement unless you've discussed them with your broker or lender first.

You can start the process by speaking with a mortgage broker who works with first home buyers to understand which lenders suit your situation and what documentation you'll need to provide.

What Happens If One of You Has Casual or Contract Income?

Lenders assess casual and contract income differently to permanent employment. If one of you is on a casual contract, most lenders will require evidence of at least six to twelve months of consistent income with the same employer, or across multiple employers in the same industry. If you're a contractor, lenders will generally want to see at least two years of ABN trading history or tax returns showing consistent income.

Consider a couple where one partner is a permanent employee earning $75,000 and the other is a casual retail worker earning $50,000 over the past year. The lender may accept the full $50,000 as assessable income if the casual worker can provide payslips showing consistent hours over twelve months with the same employer. If the hours fluctuate significantly or the employment is recent, the lender may reduce the amount they're willing to include, which lowers the overall borrowing capacity.

If you're self-employed or earn variable income, a broker can help you identify lenders who are more flexible with income assessment, particularly if your tax returns don't fully reflect your current earning capacity. Some lenders will accept alternative documentation or assess your income based on business activity statements rather than full financials, though those options typically come with slightly higher rates.

What Should You Avoid Doing Before You Apply?

Don't take on new debt in the months before you apply for a home loan. That includes car loans, personal loans, and even increasing the limit on an existing credit card. Every additional commitment reduces your borrowing capacity, and lenders will see those changes when they assess your application.

Don't change jobs unless it's unavoidable. Lenders prefer to see stable employment, and if one of you starts a new role during the application process, the lender may require a longer period of payslips or ask for additional documentation. If you're moving to a higher-paying role in the same industry, most lenders will accept the change, but it's worth confirming that with your broker before you resign.

Don't make large unexplained deposits into your savings account. Lenders review your bank statements to confirm your deposit is genuine and to assess your spending habits. If you suddenly deposit $15,000 into your account a week before applying, the lender will ask where it came from. If it's a gift, you'll need a signed declaration. If it's a loan, it will be treated as a liability and will reduce your borrowing capacity.

Buying your first home as a couple involves more than finding the right property. It requires understanding how lenders assess your combined financial position, preparing your deposit in a way that meets genuine savings requirements, and making decisions about loan structure that suit both your circumstances and your plans for the next few years.

Call one of our team or book an appointment at a time that works for you. We'll review your combined income, deposits, and eligibility for government schemes, and help you prepare an application that reflects your actual borrowing capacity.

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