Aspiring first-time home buyers have a wealth of mortgage options that can suit their specific financial needs, including loans that require as little as 3% down. 

In the video below, Motley Fool analysts Gaby Lapera and Nathan Hamilton discuss a few of the key facts homeowners ought to know before applying for a low down payment mortgage.


Gaby Lapera: Is a low down-payment mortgage good for homeowners?

Nathan Hamilton: I'll preface it, again, with -- it depends on your financial situation. I'd say for the most part, when going to a bank, you're typically going to be required to put down a pretty significant down payment.

Lapera: About 20%.

Hamilton: 10% to 20% depending upon the scenario. There are different loans -- like an FHA loan that we talked about before, and even some bank loans, recently -- where you can put down 3%, 3.5%. If you look at how much money that actually is, most people are going to only be able to afford to put down a very small percentage.

Here's what it means for you. You're paying private mortgage insurance when you're putting down less than 20%. In those scenarios, looking at the options out there, that really is the only option. What I would look at is sizing the mortgage.

To me, this question means more: What can I afford for a mortgage payment? I would look at it as sizing what you can afford. Typically, a rule of thumb is about 30% to 35% debt to income. What that means specifically, is you can take out a monthly mortgage payment that equates to about 30% of your very top line income, the top line on your paycheck. That's generally where you want to keep your housing expenses.

Lapera: At a maximum.

Hamilton: Yep. I would even fully bake in utilities, HOA fees, insurances, title, all of these random fees that come across that you pay each month into that 30% to 35% number.