How soon after purchasing a home can you purchase another?

Question

I want to purchase my first rental investment property however before that I want to purchase my first home that my family can live in. How soon after purchasing a home will a loan company give out another loan to purchase another property?

In a perfect scenario I would buy our first home to live in for a couple years or so, then buy our first rental investment property and rent it out. Eventually, turn the home we lived in, into a rental property and move into a different home; I figure that's how I get the ball rolling. From what I've been reading I'm starting to understand you can have more than 1 loan open at a time, I didn't know that before - so my question again is, how soon after buying your first home to live in, can you buy an investment rental property ontop of that? Does it simply depend on if I have the down payment? Or does it depend on what type of loans I'm getting, for example...if I have a 3.5% FHA loan on the home I bought, they might not give me another loan - however, if I purchased my first home with 20% down initially, I'd be set to get another loan.

Picking brains looking for some answers here, thank you.

And it's 2020! I'm happy I finally got the courage to start posting my questions on BP and start communicating with folks. I've been reading these forums, listening to audiobooks n podcasts, educating myself on financial freedom for months and now I wanna focus on the next 10 yrs of my life and rlly change up my financial status.

Theresa Harris · Answer

@Blake Hrabal  Be honest with your bank.  I bought two sets of properties, one within 2 months of each other-both with mortgages and another two on the same day-one cash, one with a mortgage.  Aside from the cash one, the bank knew about all of them as I was dealing with the same bank,

Mike McCarthy · Answer

@Blake Hrabal Sounds like you're on the right track.  The FHA is a great loan for new homebuyers.  I have a friend who plays the 'FHA' game.  Buys an old house for 3.5% or 5% down, fixes it up while living in it for 2 years, then rents it and buys another.  It's been working great for him!

But you can certainly buy faster at 20-25% down.  Just be aware that most loans for investment properties require 20-25% down.  You'll be hard-pressed to find one that will allow 15% down.  Just FYI.

Jeremy Taggart · Answer

@Blake Hrabal As long as you can qualify for the additional loan you can purchase it as soon as you want afterwards. The main thing the primary residence mortgage will affect is your debt to income ratio. They'll count that mortgage towards your debt when underwriting to see if you can qualify for the additional loan. But if you can still qualify and have the funds to close you should be good to go. They'll also count a portion of the rent/s if you are buying a property that is already occupied and has a lease in place. So that could be helpful if you are close. If you are buying a primary residence you can use a low down payment FHA loan 3.5% or 5% down conventional however investment properties you'll need to bring at least 15% down to the table typically at a minimum. There's also the 0% down USDA and VA loans if you can qualify for either of those for the owner occupied place.

Mike McCarthy · Answer

@Blake Hrabal one other facet is that you can close on multiple loans at the same time - made easier if they are both through the same bank. The benefit is that you only need to provide the mountain of documentation once.

If you want to close back-to-back, it’s usually easier to work on one, then once closed, start the next. It’s not that you can’t close separately, but the underwriters of the second loan will need to know about the first, and if anything changes in that loan, it can affect approval of the second. Just gets more complicated and a bit more risky.

Most people can get around 4-6 loans until DTI starts catching up to them.

Mike McCarthy · Answer

I'd recommend being honest with your mortgage broker, if they understand investing, they will be able to help guide you on your path.  They may be able to offer other products that meet your needs and help figure out how to reach your goals.  There shouldn't be any issue with discussing your short and long term plans with your broker!

But once you get into the loan process and underwriting, stick to the specifics of that one loan.  Underwriters are inherently risk-averse, so you typically want to focus on what they need to get this one loan closed.  If you have questions, ask your mortgage broker - they will help answer any 'odd' questions correctly (though always answer honestly).

I try to stick with one broker/company if possible - though keeping my eye out for better deals.  Having a trusted person to work with and understanding the loan process is worth it to me.  Also, some companies are MUCH better at closing than others.  I'd rather pay a little extra and not get a cut-rate mortgage, and in return get someone I can trust and work with again and again.

But many banks do limit you to 4 conventional mortgages, and 10 conventional mortgages across all banks.  But there are always ways to get more when needed!

Blake Hrabal · Answer

@Jaret Walker @Joshua Dorkin @Mike McCarthy @Jeremy Taggart

Thanks for the feedback everyone.

I've got a couple other questions related to this that I've thought of recently, any response is appreciated.

1. Is a lender someone your trying to persuade that you're good for the loan and you keep them in the dark on some details of your motive to obtain multiple properties, ie. the plan to purchase a primary then a rental property soon after - less is more when it comes to explaining what your end goal is to them  OR is the lender someone you want to be open and honest with, give the full plan of action, and let them do their best job to help you accomplish your goal as long as you meet certain credentials to qualify for a loan?  If it's the 2nd one....so your saying it's totally alright to sit down with your lender and say "I want to buy a primary house to live in....then soon after buy a rental property....then 2 years or so after i'm going to rent out my primary residence and move into a different primary....and may want something else in between, what's it going to take to get me there?

2. I know to screen multiple lenders before settling. However, once you've found one, do you take out all your loans from that lender? Or do you only take 1 loan out and have to find another lender when your wanting to purchase your next property?  Perhaps there's a cap for each lender, for example, you can max out at 3-5 loans from a lender then have to find another one. If anyone has any literature or advice on this topic that'd be great.  Is there just a max amount of loans a single person can have out as per the state or fed gov?

Joshua Tessier · Answer

@Blake Hrabal

If you are trying to purchase these as owner occupied low down payment loans it’s generally 6 months between loans with a good reason for why your moving from what I have found. Start with the multi and then move to the single family. It’s easier to explain to a bank and can be done quicker as they are more likely to lend once you can establish tenants leases and justify why you want to move to a single family home.

Jaret Walker · Answer

@Blake Hrabal

As long as you qualify for the lenders term you can do them back to back. I am closing on a loan this month and will be starting another builders loan before I close on the first loan.

Blake Hrabal · Answer

Thanks for that. Absolutely.

@jeremy mentioned 15% down in the first reply to this thread; however, I haven't heard of that for a conventional loan before in the state of Colorado. It's typically 20% minimum for conventional here. I still appreciate all the advice I get from BP though whether I can utilize it in my personal applications or not.  Keep em coming.

Blake Hrabal · Answer

This was really helpful and good to know. I guess after thinking about it for a bit, unless you had crazy money and could buy homes outright for full, that every home you buy is on a loan. So yes real estate investors have many loans open at a time. And yes you can purchase another home quickly after you buy your primary residence as long as you have the capital for down payment of 15-20% for the 2nd home.  Think i'm on the right track here?

I want to buy a primary residence 3.5% FHA first time home buyer, then I want to buy a first rental property not too long after with 20% down.

How soon after purchasing a home can you purchase another?

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