Buy a Primary Residence or Investment Property first? DTI

[Rahnesha White]

I currently live in a high cost market ( California) and I for sure want to buy a primary residence here to house hack in the near future. However, I also want to buy an investment property (Small MTF 2-4 LTR) in the midwest due to the lower purchase prices so I would be able to get started sooner. In terms of my DTI would buying an investment property first make it harder to qualify for financing on a primary residence later because I will now have the debt from the investment property? Im wondering if getting a primary residence first would make more sense since I currently have no debt and from my understanding investment properties financing typically take into account the income of the asset versus my personal income to qualify me for the loan versus fannie mae and freddic mac( conventional loans) which would consider the debt of the investment property (DTI) in considering the whole picture? Also would creating an LLC putting the investment property into that help diminish the concern about the new debt affecting my DTI for qualifying for a primary residence?Hopefully that makes sense trying to articulate these concerns that are floating around in my head lol. Also my current rent is very low currently so there isnt necessary a rush for me to get a primary residence.

[Nate Sanow]

DTI does and doesn't matter. There are loan types and lender types that do not look at your personal DTI as strictly as I think you think they do.

If I had to choose I’d choose something to own as a primary residence first. There is so much stuff you learn by getting one. Also the loan products available for owner occupant allow you to get a property with so much less than 20% down. It sounds like you might have it soon have access to that 20%… but if you buy a primary with an owner occupied loan, which you can do for a 3% , your 20% down should still be intact… thus allowing you to still get back to investing. Unless I’m missing part of the equation here. 

not to mention if you live in something you don’t own, it really as if you are paying 100% interest to the property owner. No portion of that monthly payment produces equity, appreciation, or the possibility of moving out and keeping the r asset and then renting the property out - but you could of course do exactly that by owning a primary first. 

Best wishes to your success.