First Home Buyer Borrowing Capacity: Bank Checklist

The three numbers to keep separate

Keeping these numbers separate prevents a great deal of confusion during a first-home search.

• Comfortable repayment: The amount you believe leaves enough room for normal living, savings and unexpected costs.
• Serviceable loan amount: The amount a particular lender’s assessment says the household can support after its income, expense, debt and rate assumptions.
• Purchase budget: the property price you may be able to pursue after combining the serviceable loan amount with your genuine savings or eligible deposit contribution, while retaining money for applicable upfront costs.

1. Assessable income

Lenders start with income, but they do not necessarily use every income type in the same way. Regular PAYG base salary is usually the simplest income to evidence. Overtime, bonuses, commissions, casual hours, allowances and self-employed income can require a track record and may be assessed more conservatively.APRA’s residential mortgage lending guidance says prudent practice is to discount most non-salary income by at least 20%, with a larger reduction appropriate in some circumstances. The policy of the lender you approach and the evidence available will influence the outcome.

• PAYG base income and whether it is ongoing
• Probation status, employment type and length of employment
• Overtime, commissions, bonuses and allowances
• Casual, contract or second-job income
• Self-employed income and business financials
• Government payments or other recurring income, where a lender accepts them

2. Living expenses and household costs

Lenders need a realistic picture of what the household spends to live. This extends beyond groceries and utilities. Dependants, childcare, transport, insurance, medical costs, education, subscriptions, rent or board, and regular discretionary spending can all matter.Do not assume you can enter a low round number and move on. APRA guidance says lenders should not rely solely on a benchmark such as the Household Expenditure Measure (HEM) or HPI. Prudent practice is to use the higher of your declared expenses or an appropriately scaled benchmark.This is one reason borrowers with the same income can receive different estimates. Household size, location, dependants and actual spending patterns change the calculation.

• List regular costs honestly and consistently.
• Include annual or irregular bills by converting them to a monthly amount.
• Do not overlook private health cover, school fees, child support, strata costs, pet costs or recurring subscriptions.
• Keep enough room in your own budget for home ownership costs that may replace rent, including rates, insurance, maintenance and, where relevant, strata levies.

3. Existing liabilities and credit limits

Existing debts reduce the income available for a new mortgage. This can include personal loans, car finance, buy-now-pay-later accounts, investment debts, tax repayment arrangements and HELP repayment obligations where they affect take-home pay.Credit-card limits are especially easy to underestimate. Even if a card has a nil balance, lenders may assess the available limit as a potential obligation. Westpac specifically notes that a lender may assume credit limits are fully used when calculating borrowing ability.

• Credit cards and store cards, including unused cards
• Personal loans and car loans
• Buy-now-pay-later facilities
• HELP or other compulsory payroll deductions
• Child-support or maintenance commitments
• Existing home loans, guarantees or jointly held debts

4. The proposed loan at a higher assessment rate

The mortgage repayment in a serviceability calculation is not always based solely on the rate shown in an advertisement or your loan illustration. APRA says its minimum mortgage serviceability buffer has been 3 percentage points above the loan interest rate since 2021 for APRA-regulated banks.For example, this means a loan priced at 6% may be assessed at a rate at least 3 percentage points higher for serviceability purposes. The precise repayment used also depends on the product, term and repayment type. This higher-rate test is a key reason a loan that appears affordable at today’s repayment can still produce a lower borrowing-capacity figure.It is a resilience test, not a prediction that your customer rate will immediately rise to the assessment rate.

5. Debt-to-income ratio and lender policy

Debt-to-income ratio, or DTI, compares total debt with gross annual income. It is another lens a lender may consider alongside serviceability, credit history, security property and deposit position.From 1 February 2026, APRA-regulated lenders have a portfolio-level limit: no more than 20% of new owner-occupier lending, and no more than 20% of new investment lending, can have a DTI of six or more.That does not mean every borrower at or above six times income is automatically declined. It means a lender must manage the share of higher-DTI loans it writes, so its appetite and policies can differ over time. It is another reason to avoid treating one calculator result as universal.

Income and employment checklist

Have evidence ready for every income source you want a lender to consider.

• Recent payslips and, where requested, an income statement or tax return
• Employment contract or letter if your role, hours or salary have recently changed
• Evidence of overtime, commissions, bonuses, casual hours or allowances
• For self-employed applicants, the financial documents requested by the relevant lender or broker
• Details of any planned change to work hours, parental leave, contract end date or second job

Expenses and commitments checklist

Start with recent transaction history rather than relying on memory. Your aim is to understand your ordinary monthly position before a lender reviews it.

• A monthly household budget covering essentials and discretionary spending
• Three months of bank and credit-card statements if requested
• Current balances, limits and repayment amounts for each debt facility
• Details of HELP repayments, child support, school fees, childcare and insurance
• A list of subscriptions and recurring payments that may be easy to miss

Deposit and purchase-position checklist

Borrowing capacity is only one part of your buying position. You also need enough funds to complete the purchase under the lender’s loan-to-value ratio requirements and to pay applicable purchase costs.

• Evidence of genuine savings, gifted funds or other deposit sources
• A realistic allowance for deposit, stamp duty where applicable, conveyancing, inspections, lender fees and moving costs
• The intended property type, location and approximate price range
• Whether you expect to use an Australian Government home buyer scheme or a state or territory concession, subject to eligibility and participating-lender rules
• A small post-settlement cash buffer rather than committing every available dollar to the transaction

A larger deposit is helpful, but it solves a different problem

Saving more can be very valuable. It may reduce the amount you need to borrow, improve your loan-to-value ratio and help cover upfront costs. In some situations, it may also reduce or avoid lenders mortgage insurance.But a deposit does not create additional assessable income. If serviceability is the binding constraint, adding savings will not necessarily make a bank lend more; it may instead help you buy within the borrowing amount you can service.

Changing lenders can change the estimate, not the underlying facts

Lenders can differ in how they treat certain income types, expenses, existing liabilities and product structures. A different lender may produce a different result for the same household.That does not make one answer automatically right or wrong. A suitable loan still needs to meet the lender’s credit criteria and be appropriate for your circumstances. Treat comparison as a way to understand policy differences, not as a promise of approval.

Check the information before you apply

Correctness is the first opportunity. Make sure declared income, debts, credit limits, dependants and expenses are complete and consistent with your paperwork. Review your credit report for errors and resolve inaccuracies through the relevant credit-reporting process.If an expense is temporary or a debt is due to be repaid, ask what evidence a lender would need and whether the timing will matter.

Reduce commitments only where it makes financial sense

Paying down a genuine debt or reducing an unnecessary credit limit may improve the numbers a lender uses. However, do not close useful facilities or redirect all savings without considering your broader budget, emergency funds and any fees or consequences.The key distinction is between reducing a real ongoing commitment and temporarily moving money around. Lenders can request statements and supporting documents, so transparent, sustainable finances are more useful than cosmetic changes.

Build a home-owner budget, not just an approval budget

Even if you qualify for a particular amount, it may not be the right amount for your household. Test repayments at your expected rate and at a higher rate, then include property costs that may not appear in your current rental budget.A purchase range that leaves room for repairs, rates, insurance, strata levies where applicable, savings and ordinary life may offer more flexibility than aiming for the absolute maximum lender figure.