Help with financing scenarios for buying first 2 properties

[Account Closed]

My husband and I are considering purchasing a duplex in the $100k-$130k range for OO in the next few months. We would then like to purchase another MFH (ideally 4 unit) within a year of our duplex purchase, and I anticipate that purchase being closer $300k (though hopefully less).

We have $30k available for down payment and closing costs, because we were initially planning to put 10% down on a SFH in the $250k range. What would you suggest for lending scenarios to purchase the two homes? Currently we have about $120k in W2 income to report, though at second purchase we'll likely be down to $65k.

My initial thought was to get a 15 yr mortgage with 20% down for the duplex, but then was left scratching my head about coming up with money to put down for the second purchase. Perhaps we shouldn't tie up as much money in the first purchase?

Many thanks for any advice or ideas.

[Brie Schmidt]

Originally posted by @Account Closed:

My husband and I are considering purchasing a duplex in the $100k-$130k range for OO in the next few months. We would then like to purchase another MFH (ideally 4 unit) within a year of our duplex purchase, and I anticipate that purchase being closer $300k (though hopefully less).
We have $30k available for down payment and closing costs, because we were initially planning to put 10% down on a SFH in the $250k range. What would you suggest for lending scenarios to purchase the two homes? Currently we have about $120k in W2 income to report, though at second purchase we'll likely be down to $65k.

My initial thought was to get a 15 yr mortgage with 20% down for the duplex, but then was left scratching my head about coming up with money to put down for the second purchase. Perhaps we shouldn't tie up as much money in the first purchase?

Many thanks for any advice or ideas.

Account Closed - Congrats on your first property! This is exactly how my husband and I started. You should really sit down with a lender first and run all the numbers. (I can refer one if you need) But there are a few things you should know. First, buying a multiunit that you will live in is the easiest path. You will need 5% down for FHA but will be forced to pay PMI until you refinance out. The other option is a conventional loan with 20%. For your first property you cannot include the rent from the other units to qualify. Another factor the look at is DTI (debt to income) https://www.credit.com/calculators/dti/

If you go FHA you must live there for 1 year. You say you plan on buying another property. If you plan on staying in the original property the second will be considered an investment property. These properties have slightly higher interest rates and require 25% down. You will also need the down payment + 6 months of reserves + closing costs in cash to qualify.

Typically lenders require rents to be on your tax returns for 2 years before you can use that income to qualify, so if you plan on buying 2 in a year that could be tricky. This can be waived with substantial reserves.

If I were you, I would buy the more expensive/bigger property now when you can get OO rates and terms.