Avoid These 4 Mistakes When Applying for Your First Home Loan

Getting Your First Home Loan Application Right

The most common mistake first home buyers in Freeling make is applying for finance before they understand what they're eligible for. South Australia offers a $15,000 grant and full stamp duty relief on new homes and vacant land, but both apply only to new builds, not established properties. If you apply for a loan on an established cottage in town without checking this first, you miss out on both and walk into settlement with a much larger bill than you planned for.

Assuming You Need a 20% Deposit

You don't. The Australian Government 5% Deposit Scheme lets eligible first home buyers purchase with a 5% deposit and no lenders mortgage insurance. In South Australia, the property price cap is set at $900,000 for capital city and regional centres, and $500,000 for other areas. Freeling falls under the $500,000 cap. The scheme is available through participating lenders, and there are no income limits or annual place caps anymore. You can use this scheme alongside South Australia's first home buyer stamp duty relief and the $15,000 grant, as long as you're buying a new home or vacant land.

Consider a buyer looking at a house and land package just outside Freeling. With the property sitting under the $500,000 threshold, they could enter with a 5% deposit, avoid paying LMI, claim the $15,000 grant, and pay no stamp duty on the transaction. That's thousands of dollars in upfront costs removed. Without knowing the scheme existed, the same buyer might have delayed for years trying to save a 20% deposit or paid LMI on a 10% deposit loan.

Choosing the Wrong Loan Structure for Your Situation

Many first home buyers ask for a variable rate loan with an offset account because that's what they've heard is standard. It might not suit you. If your income is steady but you want certainty over your repayments for the first few years, a fixed rate or split loan structure could make more sense. A split loan lets you fix part of your loan and keep the rest variable, so you get payment stability and the flexibility to make extra repayments on the variable portion.

Not every lender offers the same loan features on loans approved under the 5% Deposit Scheme, so if an offset account or redraw facility matters to you, confirm it's available before you apply. Some lenders will allow full flexibility, others restrict certain features depending on your deposit size and loan structure.

Missing Out on Stamp Duty Relief Because You Bought the Wrong Property Type

South Australia's stamp duty concession for first home buyers applies only to new homes and vacant land. It does not apply to established homes. This is not widely understood, and it catches buyers out regularly. If you're purchasing an older home in Freeling, you will pay full stamp duty. If you're buying a newly built home or a block of land to build on, you pay nothing.

The difference in settlement costs is significant. Stamp duty on a property can run into the tens of thousands depending on the purchase price. Losing that concession because you didn't realise it was property-type specific can blow your budget before you've even moved in. The $15,000 first home owner grant follows the same rule. New builds and vacant land only. Established homes don't qualify.

When you're looking at properties around Freeling, where there's a mix of older homes closer to the town centre and newer subdivisions on the outskirts, this distinction matters. A weatherboard cottage on the main street might feel like the right first home, but it won't attract the same government support as a new build on a smaller block just outside town. That doesn't mean you shouldn't buy it, but you need to budget accordingly.

Applying Before You Have Pre-Approval

Pre-approval is not the same as making an offer, but it does the same job in terms of showing you what you can afford and giving you confidence when you're ready to move. A home loan application without pre-approval means you're guessing at your borrowing capacity and hoping the numbers work out after you've already committed to a contract. In some cases, buyers find out too late that their income, expenses or credit history reduces what they can borrow, and they either lose their deposit or scramble to find a guarantor.

Pre-approval also gives you time to fix problems before they become deal-breakers. If your credit file has an error or your savings aren't structured in a way the lender accepts, you can sort it out before you're up against a finance clause deadline.

For buyers in regional areas like Freeling, where the property market is smaller and good blocks or homes can move quickly, having your finance sorted in advance means you're ready when the right property appears. You're not waiting weeks for a lender to assess your application while someone else signs the contract.

Working Out What You Can Actually Afford

Lenders assess your borrowing capacity based on your income, expenses, existing debts and living costs. What they're willing to lend is not always what you should borrow. Your borrowing capacity is one thing, your comfort level with repayments is another.

If you're planning to start a family, change jobs, or reduce your hours in the next few years, factor that into your budget now. A loan that feels manageable on two full-time incomes can become tight quickly if circumstances change. Freeling offers a more affordable entry point than metro Adelaide, but that doesn't mean you should stretch to the maximum loan amount just because a lender says yes.

Call one of our team or book an appointment at a time that works for you. We'll walk through what you're eligible for, what loan structure makes sense, and how to structure your application so it's in the strongest position before it goes to a lender.

Frequently Asked Questions