Buying your first home is exciting, but it can also feel like everyone else was handed a rulebook you never got. Deposits, schemes, stamp duty, pre-approval, conveyancers, settlement: there is a lot to take in. This guide walks you through the whole journey in the order it actually happens, so you know what to do next and what to ask. If you are looking at first home loans in Melbourne or anywhere else in Victoria, it is a good place to start.
Start with your numbers, not the listings
It is tempting to spend weekends at open inspections before you know what you can spend. The trouble is that falling for a property outside your range is a quick way to feel deflated. A better first step is to get clear on three numbers:
- Your borrowing power – the amount a lender is likely to lend based on your income, expenses and debts.
- Your available deposit – genuine savings plus any gifts, grants or other funds you can use.
- Your comfortable repayment – what you can pay each month and still live your life, which is not always the same as the maximum a bank will approve.
Our borrowing power calculator gives you a rough starting point, and our guide on how much you can borrow explains how lenders arrive at their figure.
How much deposit do you need?
The traditional target is a 20% deposit. At that level most lenders will not charge lenders mortgage insurance (LMI), a one-off premium that protects the lender, not you, if a loan goes bad. But 20% is not a legal minimum, and many first home buyers purchase with less.
Buying with a smaller deposit
Some lenders accept deposits of 5% to 10%, usually with LMI added. The premium can often be added to the loan rather than paid upfront, although that means paying interest on it over time. Depending on your circumstances, you may also be able to use a family guarantee, where a parent offers equity in their own home as extra security, or a government scheme that removes the need for LMI.
What counts as genuine savings?
Many lenders want to see that part of your deposit has been saved by you over a period of time, typically shown by a steady savings history or consistent rent payments. Gifts from family are generally acceptable, but lenders will usually want a signed gift letter confirming the money does not need to be repaid.
Government help for first home buyers
Several programs can make a real difference to how quickly you can buy. The details, eligibility rules and price caps change from time to time, so treat this as an overview and let us check the current rules for your situation.
- Australian Government 5% Deposit Scheme – since 1 October 2025, eligible first home buyers can buy with a 5% deposit, and eligible single parents and legal guardians with a 2% deposit, without paying LMI, because the government guarantees part of the loan. There is no limit on how much you earn and no cap on the number of places, but property price caps apply by location, and it is offered through participating lenders only. Our 5% Deposit Scheme guide explains how it works.
- Victorian First Home Owner Grant – a grant for eligible buyers purchasing or building a new home, subject to a value cap and other conditions.
- Victorian stamp duty exemption and concession – covered in detail below, and often the biggest saving of all.
Most of these come with conditions around citizenship or residency, living in the property and whether you have owned property before. It pays to confirm eligibility before you sign a contract, not after.
Stamp duty for first home buyers in Victoria
Stamp duty (officially land transfer duty) is a state tax paid when you buy property. For a full-price buyer it can add a significant sum to your upfront costs. Eligible first home buyers in Victoria get meaningful relief:
| Dutiable value of the property | What eligible first home buyers pay |
|---|---|
| Up to $600,000 | No stamp duty (full exemption) |
| $600,001 to $750,000 | Reduced duty (concession on a sliding scale) |
| Above $750,000 | Standard stamp duty applies |
For off-the-plan and house-and-land purchases, duty can sometimes be calculated on a lower value that excludes construction yet to be done, which is one reason these purchases are popular in growth areas. You will generally need to live in the home as your principal place of residence for a set period after settlement. Your conveyancer and our team can confirm how the rules apply to your contract.
First home loans in Melbourne: getting pre-approved
Pre-approval (sometimes called conditional approval) is a lender’s indication that it is willing to lend you a certain amount, subject to conditions such as a satisfactory valuation of the property you choose. It is not a guarantee, but it lets you bid or make offers with confidence.
To apply, you will usually need:
- Photo identification
- Recent payslips and possibly an employment letter (or tax returns if you are self-employed)
- Bank statements showing your savings and everyday spending
- Details of any debts, including credit cards, car loans, HECS-HELP and buy now, pay later accounts
Pre-approvals typically last a few months. If yours is about to expire, it can usually be refreshed with updated documents. Because each application can leave an enquiry on your credit file, it is worth getting advice on which lender to apply with first rather than applying to several at once. You can read more on our first home loans page.
The upfront costs people forget
Your deposit is only part of the money you need on hand. Build these into your budget early:
- Conveyancing or legal fees
- Building and pest inspections (for established homes)
- Stamp duty, if you are above the exemption threshold
- Government fees to register the transfer and the mortgage
- Loan application or establishment fees, if your lender charges them
- LMI, if your deposit is under 20% and no scheme applies
- Council and water rate adjustments at settlement
- Home insurance from the day the property is at your risk
- Moving costs and connecting utilities
From offer to settlement
- Find the property. Check it sits within your pre-approved amount and suits the lender’s criteria (some lenders are cautious with very small apartments or unusual properties).
- Get the contract reviewed. Ask your conveyancer to look over the contract and Section 32 vendor statement before you sign or bid at auction.
- Sign and pay the deposit. Private sales in Victoria usually have a short cooling-off period; auctions do not.
- Formal approval. The lender values the property and issues unconditional approval, followed by loan documents to sign.
- Settlement. Your lender, conveyancer and the vendor’s representatives complete the transfer electronically, and you collect the keys.
Building a new home instead? Construction loans work differently, with the lender releasing funds in stages as the build progresses. See our construction loans page for how that works.
Common first home buyer mistakes
- Taking on new debt before settlement. A new car loan or credit card can reduce your borrowing power and even put an approval at risk.
- Changing jobs mid-process. Many lenders prefer you to have finished any probation period. Talk to us before you make a move.
- Chasing the lowest advertised rate only. Fees, features like an offset account, and how the lender treats your circumstances all matter.
- Missing out on schemes. Some government support is only available through particular lenders or has to be arranged before you sign.
- Borrowing the maximum. Just because a lender will approve an amount does not mean it will feel comfortable in every season of life.
Ready to take the next step?
Every first home buyer’s situation is a little different, and the rules around schemes and concessions keep shifting. If you would like a clear plan for your deposit, borrowing power and the support you may be eligible for, book a free chat with our team. There is no cost for most home loans, and no obligation.
Quick answers
Can I buy my first home in Victoria with a 5% deposit?
Often, yes. Under the Australian Government 5% Deposit Scheme, eligible first home buyers can buy with a 5% deposit without lenders mortgage insurance, as long as the property is under the price cap for its location, such as $950,000 in Melbourne and Geelong or $650,000 in the rest of Victoria. Outside the scheme, some lenders accept a 5% deposit with LMI added. Rules change, so we check the current criteria before you commit.
Do first home buyers pay stamp duty in Victoria?
Eligible first home buyers pay no stamp duty on properties valued up to $600,000 and receive a sliding-scale concession between $600,001 and $750,000. Above $750,000, standard duty applies. You generally need to live in the home as your main residence for a set period, and other conditions apply, so it is worth confirming with your conveyancer before you sign.
How long does pre-approval last?
Most pre-approvals are valid for around three to six months, depending on the lender. If yours is close to expiring and you are still searching, it can usually be renewed by providing updated payslips and bank statements. Keep in mind that pre-approval is conditional, and the lender still needs to assess the specific property before it gives formal approval.