Avoid These 7 Mistakes Before You Apply for a Home Loan

The Order Matters More Than You Think

Most first home buyers in Adelaide start hunting for a property first, then sort out the finance. That approach creates pressure you don't need and limits your options when lenders start asking questions. Getting pre-approval sorted before you commit to a suburb or a price range means you know what you can borrow, which loan features suit your situation, and whether you qualify for any state or federal support. You make decisions with clarity, not urgency.

Consider a buyer looking at townhouses around Prospect or Bowden. They've saved $50,000, which feels substantial. But until they speak to a broker or lender and confirm how much of that deposit is genuinely usable, whether they need to reserve funds for stamp duty or settlement costs, and what their borrowing capacity actually is, they're guessing. If they find a property, sign a contract, and only then discover their serviceability falls short or their savings don't cover the upfront costs, they're either scrambling for a solution or losing their deposit.

Not Confirming What Counts as Genuine Savings

Lenders distinguish between genuine savings and other funds. Genuine savings typically means money you've accumulated over at least three months in your own account through regular deposits or salary. Funds that don't meet that test include recent cash gifts, proceeds from selling assets like a car, or a lump sum that appeared in your account last week. Some lenders accept gifted deposits from immediate family, but those are treated separately and often come with conditions.

If you're relying on a gift from a parent to top up your deposit, you'll need a signed statutory declaration confirming the money is a gift, not a loan. The lender will want to see the funds hit your account and may ask for evidence of where the donor sourced the money. Assuming you can use any cash sitting in your account without checking how your lender classifies it is a common reason applications stall after submission.

Ignoring the Difference Between State Schemes and Federal Programs

South Australia offers a $15,000 first home owner grant and full stamp duty relief on new homes and vacant land for eligible buyers, with no property value cap for contracts entered into from 6 June 2024. The stamp duty relief does not apply to established homes. The Australian Government 5% Deposit Scheme lets eligible first home buyers purchase with a 5% deposit and no lenders mortgage insurance, with a price cap of $900,000 for Adelaide and other South Australian regional centres and $500,000 for the rest of the state. You can generally combine the state grant and duty relief with the federal scheme, but you can't assume every incentive stacks or that you're automatically eligible for all of them.

In our experience, buyers often overestimate how much support they'll receive or misread the eligibility rules. The state grant applies only to new builds. If you're buying an established home in Unley or Glenelg, you won't receive the $15,000 grant or any stamp duty concession under current South Australian law. You may still qualify for the federal scheme if your purchase price and your lender's valuation both sit at or below $900,000 and you meet the other requirements, but there's no state-level duty relief to reduce your upfront costs.

Applying for Credit or Changing Jobs During the Process

Lenders assess your application based on your financial position at a specific point in time. If you apply for a car loan, increase your credit card limit, or take out a personal loan between getting pre-approval and submitting your full application, your serviceability changes. The lender recalculates your borrowing capacity using the new commitments, and that can reduce the amount you're approved to borrow or delay settlement while they reassess.

Changing jobs has a similar effect. Most lenders want to see at least three to six months of employment in your current role, or evidence of a permanent contract if you've just started. Moving from permanent employment to casual work, starting a new job in a different industry, or going from salary to commission-based income all trigger additional scrutiny. If you're planning any of those changes, finalise them before you apply or wait until after settlement.

Choosing a Loan Structure Without Thinking About What Comes Next

A variable rate loan with an offset account gives you flexibility to park extra cash and reduce the interest you pay without locking funds into the loan itself. A fixed rate loan offers repayment certainty but typically comes without offset and with restrictions on extra repayments. If you're not sure whether you'll stay in the property long term, or if you're considering moving from owner-occupier to investor status later, the loan structure you choose now has consequences.

Someone buying a unit in Bowden with the intention of living there for two years, then renting it out and moving elsewhere, should think about how their loan will be classified once they stop living in the property. Owner-occupier rates are lower than investment rates. If you fix your rate as an owner-occupier for three years, then convert the property to an investment after two, the lender will adjust your rate at the time of conversion, not when your fixed term ends. That rate change affects your repayments and your cash flow. Structuring the loan as a split, with part fixed and part variable, can reduce that impact, but only if you set it up that way from the start.

Not Reading the Eligibility Rules for the Scheme You're Relying On

The Australian Government 5% Deposit Scheme requires that both the purchase price and the lender's valuation sit at or below the price cap for your area. If you're buying in Adelaide and the contract price is $895,000 but the lender's valuation comes back at $910,000, you don't meet the scheme's requirements. The valuation being above the price cap disqualifies you, even though the amount you're actually paying is within the threshold.

The South Australian grant and duty relief require you to occupy the property as your principal place of residence for at least six continuous months, starting within 12 months of settlement. If you buy a new townhouse in Lightsview, settle in November, but don't move in until the following February because you're still in a rental lease, you need to live there from February through to at least July to meet the residency condition. Failing to meet that requirement means you may have to repay the grant and any duty concession you received.

Submitting an Application Before You've Checked Your Credit File

Your credit file shows every credit enquiry, default, late payment, and current account you hold. Lenders pull that file as part of the assessment process. If there's a default you didn't know about, a joint account with an ex-partner that's still listed in your name, or multiple recent credit enquiries from shopping around for car finance, the lender will see it and factor it into their decision.

You can request a copy of your credit file from the major reporting bodies before you apply. If there's incorrect information, you can dispute it. If there's a default you've since paid, you can provide evidence. If there are joint accounts you're no longer using, you can close them and update your file. Waiting until after you've applied to discover an issue means you're either explaining it under time pressure or watching your application get declined for something you could have addressed in advance.

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