If you've assumed you can't borrow enough yet, that assumption's worth checking properly before you rule anything out. A lot of the first home buyers I sit down with have a number in their head that's smaller than what a lender will actually offer once the full picture is on the table. The gap usually comes down to a handful of things, and a fair few of them are easy to fix once you know where to look.
Here's what actually moves the number, what's slowing plenty of first home buyers down right now for no good reason, and how guarantor loans and low-deposit pathways are changing what's possible for people who assumed they were years away.
Negative Equity Headlines Are Scaring Off Buyers Who Have Nothing to Worry About
Negative equity only really shows up if you're forced to sell. It doesn't happen just because property values dip for a while, and a headline warning that billions of dollars are "at risk" doesn't change that either. The only time it becomes real is if you have to sell while your loan is worth more than the property.
For owner-occupiers planning to stay put, that situation is rarely tested. You're not buying a place to flip it in six months, you're buying somewhere to live, and every repayment is building equity instead of paying off someone else's mortgage.
Property headlines aren't wrong on the raw numbers either. Auction clearance rates have softened in some areas, and a small number of buyers do face genuine hardship and end up having to sell. But story after story about buyers "at risk" can push people toward a level of caution the numbers don't really back up.
There's a real upside to a softer market that barely gets a mention. Agents call you back, open homes aren't packed, and there's actually room to negotiate for once. It's a genuine shift from a market where sellers used to hold all the cards.
The Borrowing-Power Levers Many First Home Buyers Don't Know About
A few things quietly work against buyers more often than people realise. Once you know they're there, they're pretty straightforward to sort out.
Credit card limits
It's the limit on the card that counts, not what you actually owe on it. A card you barely touch still gets treated by a lender as fully drawn, because they have to assume you could max it out tomorrow. Closing or cutting back a card you're not using is one of the more straightforward ways to lift what you can borrow.
HECS or HELP debt
Lenders don't all treat this the same way, and how close you are to paying it off can make a real difference. Some lenders take a more lenient view of HECS or HELP debt once it's close to being cleared, and policy in this area does move around over time. Rather than assuming it rules you in or out, it's worth having your actual situation checked properly.
Income is where you'll see some of the biggest gaps between lenders too. A full-time base wage is simple enough to work out, but overtime, commission and allowances get counted very differently depending on who you ask, with some lenders going off your full last financial year and others using a shorter recent average. This gap can really matter if you're applying before a fresh year of numbers exists.
There's also a myth worth clearing up, since plenty of people think you need three months in a new job before a bank will use your income. This isn't always true for buyers moving into a similar role, and a number of lenders will work off an employment contract plus a recent payslip instead.
The exception tends to be a completely new type of role after a stretch out of the workforce. Lenders tend to get more cautious in that situation, and it can rule a few of them out altogether.
Self-Employed Buyers Face More Variation Between Lenders
Self-employed applicants probably see the biggest differences of anyone when it comes to how lenders size them up. Some want a solid track record of tax returns before they'll even consider an application, while others are happy to take a more flexible view if the income looks strong and consistent. It really comes down to which lender you end up in front of.
Low-doc lending, using BAS statements or an accountant's letter instead of full tax returns, can be a useful option when the timing isn't quite there yet. It usually comes with a higher interest rate, and it's worth treating as a backup rather than your first move. If you're self-employed, the smartest step is getting your specific setup and timing looked at properly instead of assuming you're not eligible.
Guarantor Loans Have Gone From Niche to Mainstream
A guarantor loan uses equity that's already sitting in a family member's property as security, which means the buyer doesn't need to save a full cash deposit themselves. Structures vary, but a typical setup sees the lender take a loan of roughly 80% against the property you're buying, with a smaller, second security position sitting over the guarantor's place.
It's still the borrower's loan in full, and the borrower is the one paying it back, every dollar of it. The guarantor isn't gifting money or taking on the mortgage themselves, they're simply using equity they already have as security, which lets the buyer skip the large cash deposit up front.
This kind of structure tends to suit buyers with strong dual incomes at higher price points, where paying off a large loan isn't really the issue, but stacking a full 20% deposit is. Family lending arrangements have opened up too, with siblings buying together and multi-generational setups, where parents help out using equity rather than cash, becoming a lot more usual.
One thing worth flagging here is that a guarantor takes care of the deposit hurdle, but it doesn't increase what you can actually service or borrow. Borrowing capacity still comes down to your own income, plain and simple.
Lender appetite for guarantor structures outside a direct parent-to-child relationship also varies a fair bit, with some major lenders declining them automatically while others are perfectly comfortable. This is exactly why it pays to check across a panel of lenders rather than just one bank.
A Common Scenario
I see this scenario a fair bit. Two first home buyers with a strong combined income were working in professions lenders were comfortable with, but a high weekly rent meant saving a full deposit was slow, even though their capacity to service a loan was genuinely strong.
Using a low-deposit First Home Guarantee pathway, alongside a modest contribution from family toward costs, buyers in that position can end up with a repayment close to or even lower than the rent they were already paying. They weren't unaffordable buyers, they just hadn't been shown the right pathway yet.
The Bottom Line
Borrowing power isn't some fixed number a bank hands down to you. It moves depending on a few things:
- Your credit card limits
- How a lender treats variable income
- How close you are to clearing a HECS debt
- Whether a guarantor structure fits your situation
- Which lender's policies you happen to land in front of
Checking all of that properly, before you fall in love with a property or a price bracket, can genuinely change the outcome for first home buyers. It's worth doing early, before the excitement of house hunting takes over.
Frequently Asked Questions
Is now a good time to buy my first home?
For owner-occupiers planning to stay long term, generally yes. Negative equity is rarely a problem unless you're forced to sell. Investment purchases are a different call, one that comes down to location and strategy.
Do I really need a 20% deposit to buy?
Not necessarily. Pathways exist with a deposit as low as 5% through the First Home Guarantee. Guarantor structures can remove the deposit requirement almost entirely.
Will my overtime and commission count toward my income?
Yes, but lenders assess it differently. Some use your full last financial year, others a shorter recent average. It's worth getting it properly assessed before you apply.
I've only just started a new job. Do I need to wait three months?
Not always. A number of lenders will work off an employment contract plus a recent payslip instead. The main exception is a completely new type of role after a long stretch out of the workforce.
Does a credit card I don't use actually affect my borrowing power?
Yes. Lenders look at the card's limit, not the balance, since you could draw on it at any time. Closing or cutting back unused cards can help lift your borrowing power.
Is a guarantor loan risky for my parents?
It's a real commitment and shouldn't be entered into lightly. Their property secures the shortfall portion of the loan, and it's worth both parties getting independent legal and financial advice first. It remains the borrower's loan and their responsibility to repay in full.
If you've assumed you can't borrow enough, or that you need a 20% deposit to get started, it's worth having a proper conversation about it. Book a call with Lachlan and go through what's actually possible for your numbers.
About the author: Lachlan McKean is the mortgage broker behind LBK Lending, based in Brisbane and working with clients across Australia. LBK Lending holds a 5-star rating from more than 250 Google reviews. He specialises in first-home buyer and guarantor lending, plus investor and trust structures. He works with lenders that count overtime, allowances and shift loadings. He owns his own home and invests in property himself.
General information only. This article doesn't take into account your personal objectives, financial situation or needs, and isn't tax advice. Consider your own circumstances and seek advice specific to your situation before making a decision. LBK Lending. Credit Representative 527175 authorised under Australian Credit Licence 389328. Subject to lender terms, conditions and eligibility.
