Your no-nonsense guide to deposits, borrowing power, hidden costs, and how to set yourself up for home loan success
Applying for a home loan is one of the biggest financial steps most people will ever take, and while it can often feel overwhelming at first (or even every time), it’s important for borrowers to head into the process without a clear understanding of the basics. At Base Home Loans, we regularly speak to clients who are surprised by how much deposit they need, how lenders view their employment, or what costs like stamp duty or LMI really mean and how to navigate them.
So we’ve put together this guide to cover the 6 essential things you should know before applying for a mortgage. These fundamentals can affect how much you can borrow, when you should apply, and how smoothly the whole process goes.
1. Deposit Requirements: How Much Do You Really Need?
Your deposit size plays a major role in your loan approval — and in how much you’ll pay over time. While most buyers know they need a deposit, many are unclear on exactly how much they should aim for.
The standard deposit is 20% of the property price to avoid Lenders Mortgage Insurance (LMI). For a $600,000 home, that’s $120,000.
You can buy with as little as 5 – 10%, but a smaller deposit often means paying LMI and having more stringent lending conditions.
Government schemes (like the First Home Guarantee) may help you buy with a smaller deposit — but eligibility rules apply.
Tip: The larger your deposit, the lower your repayments — and the better your chances of getting approved.
2. Lenders Mortgage Insurance (LMI): What It Is and Why It Matters
LMI is often misunderstood. It doesn’t protect you – it protects the lender in case you default on your loan. It kicks in when your deposit is less than 20%, and it can add thousands to your total loan cost. You can read the full run down on Lenders Mortgage Insurance and how it works here.
Example: For a $600,000 home with a 10% deposit, LMI could cost around $10,000 – $15,000.
You can pay LMI upfront or add it to your loan, which increases your repayments over time.
Some lenders waive or reduce LMI for certain professionals or high-income earners.
Tip: Talk to your broker early to see if there are ways to avoid or reduce LMI — especially if you’re close to the 20% mark.
3. Stamp Duty: The Hidden Cost You Need to Budget For
Stamp duty, which is now officially called ‘Transfer Duty’ is a one-off government tax based on your property’s value — and it’s a often a cause for confusion, especially if you’re a first home buyer.
In WA, for a $600,000 property, stamp duty could cost over $22,000 if you’re not eligible for exemptions.
First home buyers in WA may qualify for stamp duty concessions or exemptions up to certain price thresholds.
Stamp duty isn’t included in your home loan — you’ll need to pay it separately, at settlement. You can read the full run down on stamp duty and how it works here.
Tip: Use the WA Government’s stamp duty calculator and factor this cost into your savings goal early.
4. Liabilities: How Your Debts Affect Your Borrowing Power
When assessing your application, lenders look at your total liabilities – that includes car loans, credit card limits (not just what you owe), personal loans, Afterpay accounts, and even HECS-HELP debt.
A credit card limit of $20,000 — even if you owe $0 — could reduce your borrowing capacity significantly.
Buy Now Pay Later services like Afterpay do show up on your credit report, and lenders will factor them in.
Paying down debts or reducing your credit limits before you apply can improve your loan eligibility.
Tip: Do a full audit of your liabilities and consider closing unused accounts, reducing credit limits and paying out your afterpay debts. You may even like to consider debt consolidation which involves rolling all of your existing debt into one easy to manage repayment ideally with a lower interest rate. Get in touch with us if you want to know more about how debt consolidation works.
5. Employment Conditions: Why Stable Income Matters
How you earn your income is just as important as how much you earn. Lenders prefer borrowers with consistent, stable income. That doesn’t mean casual workers or self-employed borrowers can’t get loans — it just means extra documentation or time may be needed. Ideally, you’ll have served your probationary period before applying. If not, it may be in your best interest to wait until you have.
Full-time employees usually need two recent payslips and a work contract.
Self-employed? Be ready with two years of tax returns and financials. Read more here about getting a loan when you’re self-employed.
Casual workers often need a minimum 6–12 months of employment history to be considered stable.
Tip: If you’ve just started a new job or changed how you earn income, chat to a broker before applying — timing is everything.
6. Credit Score: The Silent Deal-Maker (or Breaker)
Your credit score gives lenders insight into how well you manage your finances. A low credit score can limit your lender options or lead to higher interest rates.
Scores above 700 are considered good, and anything over 800 is excellent.
Missed payments, defaults, or high credit utilisation can hurt your score.
You can check your score for free using services like Equifax or Credit Savvy, or read our full run down of how credit ratings work here.
Tip: Review your credit report 6 months before applying for a loan to catch any errors or areas for improvement.
Knowledge = Confidence + Better Results
Understanding these six key factors — deposit size, LMI, stamp duty, liabilities, employment, and credit score — can make a huge difference in your mortgage experience. Being well-prepared doesn’t just improve your chances of approval — it helps ensure a smoother, more confident home buying journey.
At Base Home Loans, we help Perth buyers get mortgage-ready every day. If you’re thinking of buying a home or want to find out where you stand, we’re here to guide you through every step.
👉 Apply Now and let’s get started on your home loan journey or contact us today for a free discovery call.
Disclaimer: The information provided on this blog is for general informational purposes only and does not constitute financial or professional advice. While we strive to provide accurate and up-to-date information, mortgage laws and regulations can change, and individual circumstances may vary. We recommend consulting with a qualified financial advisor or mortgage broker to assess your specific situation and needs. Base Home Loans is not responsible for any actions taken based on the content of this blog. Always conduct your own research and consider seeking professional advice before making financial decisions.
