Buying your first home in Melbourne is exciting — and genuinely complicated. The combination of high prices, competitive auctions, complex stamp duty rules, and a lending landscape that rewards preparation means the gap between a smooth purchase and an expensive mistake is often just a few decisions. Here are the seven we see most often.
MISTAKE 1 Skipping pre-approval before auctions
Melbourne's auction clearance rates regularly sit above 60–70%. If you bid at auction without formal pre-approval, you're committing to a purchase unconditionally — no finance clause, no cooling-off period. If your loan falls through afterwards, you lose your deposit and potentially face damages.
What to do instead: Get formal pre-approval (not just an online estimate) before you attend a single auction. Pre-approval takes 3–7 business days and costs nothing. It also tells you exactly how much you can borrow, so you don't waste weekends inspecting properties outside your range.
MISTAKE 2 Underestimating stamp duty and purchase costs
First home buyers in Victoria may be exempt from stamp duty on properties up to $600,000, or receive a concession up to $750,000. But that exemption isn't automatic — you need to meet eligibility criteria, and many buyers don't realise they don't qualify until it's too late.
Beyond stamp duty, budget for conveyancing ($1,500–$2,500), building and pest inspection ($400–$700), loan application fees (often zero with a broker), Lenders Mortgage Insurance if your deposit is under 20%, and moving costs. On a $700,000 purchase, total purchase costs can easily reach $25,000–$40,000 on top of your deposit.
What to do instead: Ask your broker to run a full cost estimate before you start making offers. We include this in every first home buyer consultation at no charge.
MISTAKE 3 Borrowing the maximum the bank will give you
Banks will lend you the most they're comfortable with — but "what the bank will lend" and "what you can comfortably service" aren't the same thing. A loan sized at your maximum borrowing capacity leaves no buffer for rate rises, unexpected expenses, or changes in income.
What to do instead: Run your own budget. Factor in a 2% rate rise above your current rate and see what the repayment looks like. If it's uncomfortable, borrow less. A good broker will help you think through this, not just maximise your loan.
MISTAKE 4 Going straight to your own bank
Your bank will offer you their products and their rates. They won't tell you that a competitor has a better deal. We regularly see first home buyers accept rates 0.3–0.6% higher than what they could access by shopping around — that's thousands of dollars per year in unnecessary interest.
What to do instead: Use a mortgage broker. We're accredited with 30+ lenders and legally required to act in your best interest. Our service is free — we're paid by the lender when your loan settles, and we disclose that commission in writing.
MISTAKE 5 Misunderstanding the Home Guarantee Scheme
The federal government's Home Guarantee Scheme allows eligible first home buyers to purchase with a 5% deposit without paying Lenders Mortgage Insurance (LMI) — saving potentially $10,000–$20,000. But places are limited, eligibility criteria apply (income caps, price caps, property type restrictions), and not all lenders participate.
What to do instead: Check your eligibility early. We can tell you in 10 minutes whether you qualify, which participating lenders are accepting applications, and whether the scheme makes sense for your situation or whether another structure is better.
MISTAKE 6 Making big financial changes during the application
Once you've applied for pre-approval or a formal loan, avoid changing jobs, taking on new debt (car loan, credit card, BNPL), making large cash withdrawals, or moving significant money between accounts without a clear paper trail. Lenders re-verify your financial position right before settlement. Changes that look like instability can trigger a re-assessment or even a rejection.
What to do instead: If you're considering a career change or major purchase, discuss it with your broker first. Sometimes the timing can be managed. Sometimes it genuinely needs to wait until after settlement.
MISTAKE 7 Not getting a building and pest inspection
In Melbourne's competitive market, some buyers skip building and pest inspections to save money or move faster. This is a false economy. A termite infestation or significant structural issue that wasn't picked up before purchase can cost tens of thousands to remediate — and won't be covered by insurance.
What to do instead: Budget $400–$700 for a building and pest inspection on every property you're seriously considering. It's the cheapest insurance you can buy. For properties selling via private treaty (not auction), make the contract subject to a satisfactory inspection.
Ready to buy your first home in Melbourne?
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This article is general information only and does not constitute financial or legal advice. Stamp duty exemptions and government scheme eligibility criteria are subject to change. Please confirm current rules with your broker or conveyancer.