which loan to get first?

Question

I am in a situation in which I have some savings and i would like to spend 80% of the savings on the down payment to buy a property for living and invest 20% as the down payment on a rental property in the near future. The living property which is in the Seattle area is more expensive than the target rental property, which is in southeast.

My question is since i am going to get two loans soon about the same time, which loan shall i get first to keep my total interest rate the lowest:, is it better off to get the loan for the more expensive living property then to get the loan for the less expensive property or there is not much of difference which one comes earlier? I kind of have the impression that people will get a higher interested rate buying a home when they already have a very expensive car loan. Not sure if the same logic applies here and maybe it varies from market to market, or lender to lender?

Can someone give some insights on this?

Thanks,

Feifei

Jerry Padilla · Answer

@Feifei Zhang

Your home purchasing is going to depend the loan size, credit score, down payment, type of property, not how many other homes you own. A primary home is going to to have a lower interest rate than an investment property.

One thing to consider is starting out purchasing a multi-family property and living in one of the units. There is a low down payment portfolio option that I am aware of if the property is above conforming limits. Within conforming limits FHA may be an option as well as Home Possible - but the no income limits with Home Possible are going away soon.

Feifei Zhang · Answer

Thank you very much for your replies and suggestions! @Jerry Padilla @Jake Alger

Jake Alger · Answer

Hi @Feifei Zhang,

The number of loans you have shouldn't effect your interest rate.  Interest rates depend on credit score, debt-to-income ratios, down payment, etc.  Rates for pure investment properties tend to be higher than those for owner occupied.  With different loans, there are different requirements as mentioned in the comment by @Jerry Padilla.

Depending on what your overall goals are, "house hacking" a multi-family property could be an option, but not super easy to find around the Seattle area.  A lot of what you may be looking for will be dependent on location, price and urgency.

Finding a reputable lender and real estate agent who knows the area, process and programs would be my first recommended steps.  Explaining your plans and knowing what you can afford or if your plan will work, is crucial before you get too far in the process :)