It is one way house hunters can get around the Reserve Bank's restrictions on loans with less than 20 per cent deposit.
Under the scheme, prospective buyers can still borrow up to 90 per cent of a property's value.
To qualify for the 10 per cent deposit loan, borrowers have to have earned less than $80,000 in the last 12 months as an individual, or $120,000 as a couple combined.
They must intend to live in the property rather than purchasing it as an investment.
Simon Tremain, managing director of Tremain Real Estate in Hastings, said the biggest problem with the scheme was that locals knew so little about it.
"There's a massive awareness lacking. All our agents ... are very aware of how [Welcome Home Loan] works, how you get your [KiwiSaver] deposit subsidy, and making sure first home buyers are aware of the Government giving them money to buy a house.
"If it was in our day, it would seem like a massive gift - why wouldn't everyone be taking advantage of it?"
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The scheme, along with KiwiSaver, was hugely beneficial for first home buyers wanting to get on the Hawke's Bay property ladder.
Welcome Home Loan's house price cap for a first home in Hawke's Bay was $300,000, which Mr Tremain said was easily achievable.
"Our median house price in the first home buyer [market] is below that."
Price caps vary for each region, with the highest of $485,000 in Auckland and $425,000 for Wellington and Queenstown. The rest of the country is capped at between $300,000 and $400,000.
Until last year, eligible buyers under the scheme didn't need a deposit to buy a house if it was worth $200,000 or less, but needed a 15 per cent deposit for properties above that price.
However, eligibility criteria changed to a minimum deposit of 10 per cent across the board once the Reserve Bank's restrictions were introduced.
Property commentator Alistair Helm said Welcome Home Loan was a good scheme for regional house hunters. But the house price caps restricted options in the bigger cities where median prices had rapidly increased.
An "unintended benefit" of house hunters in main centres struggling to afford properties was the incentive for people to buy houses in regional New Zealand, where the median price was much more affordable, he said.
"With the LVR impact ... it was great that Welcome Home Loans were exempt from the restrictions of the retail banks."
The restrictions gave the loan scheme more visibility "for people who were eligible, lived outside of the cities, and could now see a way to afford a house with less than 20 per cent deposit".
But Roost mortgage broker Paul Richardson warned some of the scheme's requirements could leave first home buyers out of pocket.
Until recently banks were reluctant to give borrowers pre-approval for low deposit loans - like those under the Welcome Home Loan scheme. This meant buyers often had to fork out to have a property valued before going to auction - even though they might miss out on the property. This could cost about $400-$500.
"That's take home pay for some of my clients going for these Welcome Home Loans. So you've got to be careful."
Chief executive of iLender Jeff Royle said the scheme was far too restrictive and an onerous process, but its redeeming feature was that the deposit could be sourced from anywhere.
"It can all come from the bank of mum and dad."
Most lenders required that at least 50 per cent of the deposit came from KiwiSaver, or some other source of "genuine savings", he said.
But Welcome Home Loan would accept the profits of a recently-sold car.APNZ
