I can do a 20% down, but why not 3.5% FHA? Please Help

[David Levy]

Hi all,

I've been a "renter" all my life and finally buying a townhouse in state of NJ to live in. 

After reading a lot about putting my money to work and I do have over 130k to work with, I am now thinking if I should avoid doing the 20% down payment (70k) on my new townhouse and instead do the 3.5% FHA loan and use my savings for buying rental properties.

Where I live, I can get a 

Studio for 140k and rent it for about $1,200-1,300

1 Bedroom for $200k and rent it for $1,500-1,600

Bottom line is ... at just 3.7% APR loss, I can put my money into more properties or even places like mutual funds where it may be making me 7%+.

Thoughts? Thank you.