10 First Home Buyer Mistakes Australians Make (and How to Avoid Them)
Buying a first home is the largest financial decision most Australians will ever make. It is also one they have never done before, navigating a complex process with asymmetric information — vendors and agents are experienced; buyers are not. The mistakes are predictable, repeated constantly, and preventable. Most cost between $5,000 and $100,000. Some cost the purchase itself. This guide covers the ten most common and consequential errors and exactly what to do instead.
Mistake 1: Not Getting Pre-Approval Before Inspecting
Walking into open homes without pre-approval means you are shopping without knowing your budget. You may spend months falling in love with properties outside your price range, or worse — making an offer and then failing to secure finance. Pre-approval takes 2–5 business days and tells you exactly what you can borrow. Do this first, before your first inspection.
The related mistake: assuming pre-approval means you can borrow the maximum. Lenders assess at a 3% buffer above current rates. Just because you can borrow $800,000 does not mean the repayments are comfortable at your lifestyle. Use our Mortgage Calculator to test repayments at different loan amounts and rates before setting your maximum.
Mistake 2: Skipping the Building and Pest Inspection
A building and pest inspection costs $400–$700. It can identify structural defects, termite damage, rising damp, electrical issues, or plumbing problems that would cost $20,000–$100,000+ to rectify. Many buyers skip inspections to save money or time — particularly at auction where inspections must be done before bidding.
At auction, order your inspection before auction day — most agents will grant access to serious bidders during the campaign. Make the inspection cost part of your due diligence budget, not a negotiable. If the inspection reveals significant issues, you either negotiate a price reduction, request the vendor fix the issues before settlement, or walk away. All three outcomes are better than discovering the problem after settlement.
Mistake 3: Not Reading the Contract Before Auction
At auction, the contract is unconditional — there is no cooling-off period, no finance clause, no pest and building clause. When the hammer falls, you are legally obligated to complete the purchase. Not reading the contract before bidding is one of the most dangerous mistakes a buyer can make.
Request the contract from the agent at least a week before the auction. Have your conveyancer or solicitor review it — common issues include special conditions, vendor's chattels list, settlement date, and existing encumbrances on the title. Your conveyancer's fee for reviewing the contract is typically $200–$400 and can prevent catastrophic surprises.
Mistake 4: Borrowing to the Absolute Limit
The maximum borrowing capacity a lender approves is not a target — it is a ceiling. Borrowing to the maximum leaves no buffer for interest rate rises, income changes, job loss, or unexpected expenses. Between 2022 and 2023, the RBA increased the cash rate by 4.25% — adding approximately $1,200/month to repayments on a $700,000 variable loan. Buyers who borrowed to the absolute limit in 2021 faced genuine mortgage stress.
A sustainable rule: your total debt repayments (mortgage + any other debts) should be no more than 30–35% of gross household income. At 6.2% on a $700,000 loan, monthly repayments are $4,270 — requiring gross household income of approximately $150,000–$170,000 to stay within 30–35%.
Mistake 5: Ignoring Strata Levies and Sinking Funds (for Apartments)
When buying an apartment or townhouse in a strata scheme, your monthly costs include owners corporation (OC) levies — typically $1,000–$6,000 per year depending on the building's facilities and condition. Before making an offer, request the OC financial statements. Key questions: Is the sinking fund adequately funded for upcoming capital works? Are there any special levies planned (roof replacement, fire system upgrade, lift maintenance)? A $300,000 special levy distributed among 50 owners is $6,000 per owner — and it can happen without warning if the sinking fund is insufficient.
Mistake 6: Emotional Overbidding at Auction
Auctions are designed to create emotional pressure — competition, time pressure, public commitment, and an artificial scarcity environment. First home buyers frequently pay 5–10% above their rational maximum because they "didn't want to lose" after months of searching. Set your maximum bid based on a dispassionate analysis of comparable sales and your serviceability — not on how much you want the property.
Write your maximum on paper before you arrive and do not deviate. If the property goes above your maximum, walk away. Another suitable property will come. The market is not ending; there will be other opportunities.
Mistakes 7–10: Other Common Errors
Mistake 7: Not checking the flood and bushfire overlays. Properties in flood zones or bushfire risk areas affect insurance premiums (sometimes by $5,000–$20,000/year) and may have building restrictions. Check the relevant state planning portal before making an offer.
Mistake 8: Forgetting ongoing costs in the budget. Council rates, water rates, insurance, maintenance, and body corporate fees add 1.5–2.5% of property value per year in holding costs. A $700,000 property costs approximately $12,000–$17,000 per year beyond the mortgage.
Mistake 9: Not applying for available grants. The First Home Owner Grant, stamp duty concessions, and the Home Guarantee Scheme can save first buyers $10,000–$30,000+ in upfront costs. Apply for every eligible concession — the money is available for a reason. See our full guide to first home buyer grants.
Mistake 10: Choosing location based on current preferences, not future life needs. Buying near nightlife at 28 is comfortable; at 35 with young children, access to good schools and parks matters more. Buy for your 10-year future self, not your current self.
Frequently Asked Questions
- Can I negotiate after signing the contract?
- For private sale purchases with a cooling-off period, you can withdraw during cooling-off (typically 5 business days in NSW, 3 in VIC) with only a 0.25% penalty — $237.50 on a $950,000 purchase. This period is your last opportunity to complete your due diligence, have a legal review, and confirm finance. At auction, there is no cooling-off period — the contract is unconditional from the moment the hammer falls.
- What does "subject to finance" mean in a private sale contract?
- A subject-to-finance clause gives you a specified period (usually 14–21 days) to secure unconditional finance approval. If you cannot secure finance within the period, you can withdraw from the contract without penalty. Most buyers include a finance clause in private sale contracts. At auction, no such clause is possible — you must have unconditional approval or be prepared to complete without finance contingency.
- Is using a buyer's agent worth it?
- A buyer's agent represents your interests in the purchase — searching, evaluating, negotiating, and bidding at auction on your behalf. They typically charge 1.5–2.5% of the purchase price ($14,000–$24,000 on a $950,000 purchase). For buyers unfamiliar with the market, time-poor, or who want a professional advocate in negotiations, a buyer's agent can easily save more than their fee through better purchase price negotiation and avoiding mistakes. For buyers with time and market knowledge, self-representation is entirely viable.
