Investment Property vs Primary Residence

[Patrick OToole]

Question for the community!  I am a first time home buyer and have been saving/studying/networking this past year to do so.  I am running into an unexpected dilemma as I have began to put offers in the past two weeks.  

As a newbie 'investor' and lifetime renter, I wanted to purchase my first property as my primary residence and put 5% down and use the remaining money for the rehab, a couple months reserves, and then get renters in there ASAP.  That has been my plan this whole year of saving!  In my research, I must have overlooked the difference or the seriousness between the different types of investments (Primary home, 2nd Home, and Investment property).  I had read about house hacking but was really trying to get someone on a lease for the entire property and I did not realize that there were loan rules regarding 'moving in within 60 days of closing and actually living there for at least a year before legally being able to rent it out fully. Rookie mistake, I'm realizing.  I am in the dilemma now about how to truly address the loan and property as an investment property vs my primary residence, which would ultimately come with the higher interest rate and much larger down payment of 20 to 25%.  I'd love to conveniently ignore the red tape and get renters in to cash flow but I am pretty concerned about the "F" word regarding the loan.

What is the community consensus on this?  Is this dilemma routinely ignored if you don't have the money for the 20% down payment?  In my research it seems like a mixed signal of you can "get away with it" to this would be legit loan fraud with potential foreclosures if the loan is pulled and jail time.  Not trying to do that, but just trying to get in the game!!! 

[Filipe Pereira]

I think you may have misunderstood something along the way @Patrick OToole. Your first purchase can be your primary residence and an investment property. Usually banks want to know if it will be one or the other when you're shopping around. Are you buying a SFR or MFR? If it's a MFR you can certainly get it on an owner occupant loan and begin renting out the remaining units (that you aren't living in) right away. This is what is commonly know as house hacking.

If you're getting a SFR, then yes, you will need to live there to be able to get the low down payment options, but that doesn't mean you can't rent out a couple of bedrooms while you are living there (that's also known as house hacking by the way). 

In both scenarios I'd say you are investing, but it neither scenario would you need an investment property loan product that typically comes with higher rates. 

I hope that helps, but if I missed something, just tag me and I can try again! lol. Best of luck!