What Is the First Home Buyer Scheme in Australia and What Are Banks Not Telling You

Buying your first home in Australia feels overwhelming. Prices are high. Deposits are huge. And banks don't always volunteer the information that could save you thousands of dollars. That's where government home buying schemes come in — and most first-time buyers don't fully understand what's available to them.

At First Home Buyers Australia, we help everyday Australians cut through the confusion and get into their first home sooner. Let's break it all down.

What Is the First Home Buyer Scheme in Australia?

Simply put, it's a government guarantee that lets you buy a home with just a 5% deposit — without paying Lenders Mortgage Insurance (LMI).

The main scheme is called the First Home Guarantee (FHBG). It sits under the broader Home Guarantee Scheme (HGS), which is managed by Housing Australia on behalf of the federal government.

Here's what it covers:

• First Home Guarantee (FHBG): Buy with as little as 5% deposit. The government guarantees the remaining 15% — so lenders waive LMI completely.

• Regional First Home Buyer Guarantee: Specifically for buyers in regional areas (now merged into the main FHBG from 1 October 2025).

• Family Home Guarantee (FHG): For eligible single parents — only a 2% deposit required.

What banks aren't telling you: Avoiding LMI can save you up to $30,000 on a $700,000 property. That's money back in your pocket, not theirs.

Can I Buy a House With a $10,000 Deposit in Australia?

In most cases, no — but you may be closer than you think.

To use the FHBG, you need a minimum 5% deposit of the property's purchase price. On a $650,000 home, that means you need at least $32,500. On a $400,000 property, that drops to $20,000.

However, there are additional upfront costs to budget for:

• Stamp duty (varies by state — some first home buyers get exemptions)

• Legal and conveyancing fees: approximately $1,500–$2,500

• Building and pest inspection: approximately $400–$800

• Loan application fees

Tips to bridge the deposit gap:

1. Use the First Home Super Saver Scheme (FHSS) — make voluntary super contributions and withdraw them (plus earnings) for your deposit, with tax advantages.

2. Apply for the First Home Owner Grant (FHOG) — up to $30,000 in Queensland for new builds.

3. Ask about a guarantor loan — a parent or family member can use their property as additional security.

What Is the Best Scheme for First Time Buyers?

The FHBG is the most powerful scheme for most first home buyers — it removes the single biggest barrier: the deposit.

Here's a quick comparison to help you decide:

Big update from 1 October 2025: The fhbg has been massively expanded. There are now:

• No income caps — previously capped at $125,000 (single) or $200,000 (couple)

• Unlimited places — no more annual quota of 35,000 spots

• Higher property price caps across all states and regions

This is the most accessible the scheme has ever been. If you've been waiting, now is a good time to act.

How Much Income Do You Need to Buy a $650,000 House in Australia?

To comfortably buy a $650,000 home without mortgage stress, you generally need a gross household income of around $95,000–$120,000 per year.

Here's the maths. Lenders use a benchmark: your mortgage repayments should not exceed 30% of your pre-tax income. Above that is considered "mortgage stress."

*Based on approx. 6.2% interest rate, 30-year term, principal & interest.

What banks aren't telling you: They assess your borrowing power with a 3% buffer on top of the current rate — meaning they test whether you could manage repayments at around 9%. That's why many buyers think they can afford more than lenders will approve.

Quick tips to maximise your borrowing power:

• Close unused credit cards (even a $10,000 limit reduces your borrowing capacity)

• Pay off buy-now-pay-later debts before applying

• Avoid applying for new credit in the months before your mortgage application

What Is the Best Time to Buy a Home?

The best time to buy is when you are financially ready — not when the market is perfect.

Trying to "time" the property market is risky. Even experts get it wrong. That said, some factors are worth considering:

• Spring (September–November): More listings, more competition, often higher prices.

• Winter (June–August): Fewer buyers, motivated sellers, sometimes better deals.

• After RBA rate decisions: Rate cuts can boost your borrowing capacity and market confidence.

• When the home guarantee scheme has unlimited places: Right now is ideal — no quotas, no waiting lists.

The real question isn't "when is the market cheapest" — it's "when can I afford to buy without overextending myself?"

First Home Buyers Australia recommends getting pre-approval before you start inspecting. It gives you clarity on your budget and shows sellers you're serious.

What Credit Score Do I Need for a Mortgage?

Most major banks prefer a credit score of 650–700 or above. But your serviceability (income vs. expenses) often matters more.

Australia uses three main credit agencies — Equifax (0–1,200), Experian (0–1,000), and Illion (0–1,000). Here's a general guide:

What banks aren't telling you: Even a 50-point difference in your credit score can move you into a different lending tier — potentially costing you tens of thousands extra in interest over the life of your loan.

How to improve your credit score fast:

1. Pay all bills and loans on time — every time

2. Reduce your credit card limits

3. Check your credit report for errors (you can do this free via Equifax, Experian, or Illion)

4. Avoid multiple loan applications in a short period

5. Close BNPL (Afterpay, Zip) accounts you don't use

Ready to Take the Next Step?

The home guarantee scheme is one of the most powerful tools available to Australian first home buyers — and it's never been more accessible than it is right now. No income caps. No place limits. Lower barriers to entry.

But the process still has moving parts — the right lender, the right scheme, the right property price cap for your suburb. Getting it wrong can cost you time and money.

First Home Buyers Australia specialises in guiding first home buyers through every step of the journey. From scheme eligibility to pre-approval to settlement — we're with you at every stage.

Talk to the team at First Home Buyers Australia today. Your first home is closer than you think.