First time buyer status gone if I own an investment property?

Question

Hello all,

So I'm in a bit of a dilemma here. There's a property for sale at a good price that I think would be a good opportunity to start the REI journey with. I also want to buy a house to live in for myself and take advantage of the various first time home buyer programs as well. My question is, if I were to buy the investment property first will I still be considered a first time home buyer when I buy a house to live in? By definition, a first time home buyer "is an individual who has not had an ownership interest in a principal residence (anywhere) for the previous three (3) years." I won't be living in it so I'm assuming that I won't lose it. What do you guys think?

Chris Mason · Answer

No, you wouldn't be a FTHB any more. But, so what?

Do you want to take 4% down payment assist, and 5% for your rate on an owner occupied property, or do you want to take 5% DPA and take 5.5% for an owner occ 30 year fixed? Oh, and there's penalties if you refi within 3 years. All of a sudden, there's not too much "special" about the "FTHB program" is there? :)

This is one of the two most commonly used DPA programs in my state, California,  but it's basically the same everywhere. There's no "free" money.

Chris Mason · Answer

Preach.

To their credit, a lot of REI type people get it. People with net worths measured in the millions of dollars never blinked when my rate was a bit higher when I was a mortgage banker, they understood that the cashflow on a property that doesn't close b/c the mortgage got botched is precisely zero dollars and zero cents, IRR 0.000%, cap rate 0.000%, annual appreciation and equity gains 0.000%, and so on. It's mostly some of the lower net worth first time homebuyers that spaz over 0.125% or 0.375% to rate (gotta save that $27.23 on a $750,000.00 transaction, right?!) or a $500 difference in fees, which is what prompted me to make the switch to #brokersarebetter.

That noob FTHB segment of my practice has grown really fast since I made the banker -> broker switch (which is why I did it), but my landlord loan production didn't really change all that much (I didn't expect it to), it went up MAYBE 10% or so, and that's mostly concentrated among those that say "I'm a real estate investor!" who don't even own real estate (ie, they aren't "real estate investors," what they actually are is just "really picky first time homebuyers").

Whatever. I'm happy to learn from those more successful than myself. I pay my tax guy and my lawyer gal a crap ton per hour considering that I don't tend to get in tax or legal trouble, and don't worry about it, hey they gotta live in the Bay Area too. Not having to worry is what I'm paying for, and I do so gladly.

Account Closed · Answer

I guess it's my age showing, but when I started out, great interest rates were 8% and foreclosure bailout was 14% and I could charge you an arm and a leg ($15,000 loan origination fee) for the pleasure of you borrowing from me.  and from there rates went to 18% and people lined up to borrow. There was Never going to be a day rates were below 6% again.

I'm shocked, shocked I say, that investors are remotely concerned about a quarter of a percent here and there with little if any loan origination fees. If they spent more time finding and buying properties and less time stepping over dollars to save pennies, they'd be far ahead of the game IMHO.

Nik Corbaxhi · Answer

@Scott Jean Philippe, Usually the rate difference from personal FTHB to investment loan is about .5%. as it has been re-iterated here, you can capitalize on the fact that this can count as your first home and lock in that lower rate.

Also, great typical way to start building your investment portfolio is by purchasing a multifamily, live in one unit and rent the other. Very quick way of being able to save and within a short period of time you find yourself having options (invest again, or buy your own personal property) and then fully rent out the multifamily.

Scott J. · Answer

Oh ok, that's unfortunate; in Maryland, they have a program that would get rid of student loan debt depending on the value of the house you buy. It would be really helpful for me to use. Thanks for the answer!

First time buyer status gone if I own an investment property?

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