This draft proposal would allow buyers taking out their first home loan to gain finance with a deposit as little as five per cent.

This is a substantial drop from the 20 per cent deposit, which most banks require.

Singles earning up to $125,000 taxable income annually or $200,000 for couples are eligible under the scheme, which is only granting 10,000 first home buyers each year from January 2020.

Chris Heckenberg, financial counsellor at the Wagga Family Support Service, said there are important considerations to determine before people enter a "binding and long term commitment".

Mr Heckenberg said those attracted to this new scheme should first determine whether the amount that they have borrowed is within their capacity to repay and is relative to their income bracket.

"What back-up plan do the borrowers have in the event of becoming unemployed, ill or otherwise unable to pay," he asked.

"Will they be able to pay a little more each month to build up a buffer, such as being at least three months or more in advance and allow themselves a grace period should they encounter such difficulties?"

"Do they have income protection insurance? And lastly, are they prepared to sell their house and repay their mortgage should their circumstances dictate?"

Mr Heckenberg said borrowers could be at risk if only a small deposit is required by becoming exposed to negative equity if property market values fall or they get into difficulties.

"Consequently, they will have little or no room to negotiate with their lenders in such a situation, because they would have no or insufficient equity to refinance," he said.

"Most, if not all of the major lenders require a much larger deposit because of this risk ... in country areas it can be 20 per cent or more.

"Anyone trying to borrow with less deposit than this, would almost certainly be declined or they would have to borrow at a much higher interest rate to mitigate the lenders risk."

Mr Heckenberg said this could add even greater debt burden on the borrower to repay.

Similarly, director at WFSS Jenna Roberts said if people are stuck repaying their loan with higher interest rates due to an initial smaller deposit, it may negatively impact their financial position in the future.

At this stage, details surrounding which major banks will offer this low deposit and whether there will be higher interest rates are not known.

Ms Roberts said she supports any initiative that allows people the security of owning their own home.

"Home ownership is often a dream for families that seems unachievable, this initiative gives hope to local families," she said,

"We know that there is a link between having access to affordable and stable housing and better mental health outcomes.

"If this initiative helps local people access affordable and stable housing, we may see an improvement in overall mental health outcomes for the area."

There are price cap thresholds for capital and regional centres, at $450,000 for Wagga.

Wagga Real Estate specialist Greg Chamberlain said he has already had two inquiries following the announcement on Sunday.

"There's only 10,000 grants per year, so it's a first-in, best-dressed system," he said.

"It's great for Wagga and all of NSW and it will definitely assist younger first home buyers getting into the market and also benefit those selling their established homes."

Mr Chamberlain said he was not concerned that this scheme would create financial problems for those only with a five per cent deposit.

"I find that the majority of people in Wagga can afford their repayment and just don't have the savings behind them," he said.

"The biggest issue for young home buyers is not the serviceability, but the deposits that banks require.

"Halving deposits, doubles home buyers' chances into getting into a decent home in Wagga."