Settling down slower and or student loan debt are the two factors I see. 

Or would I be limited because of financing based on my income to debt ratio?

If you sold your MI house for $400K and 200K of it was debt then you would need to purchase at least $400K of real estate and use all $200K in proceeds.The number of properties does not matter - the dollar amount does.

There are a few liens for state income tax and a few credit debt liens. 

I'm first time home buyer, with some credit cards debt, I know years ago you would be available to consolidated your debt with some 10 or 20 percent down, can I do this now with a FHA loan or a conventional loan?

@Rafael Floresta If you are the successful bidder of a property being sold at Sheriff's Sale in a foreclosure action, you will receive title free and clear from the previous owners debts, including tax liens.

Since this is rental income, I will not lose sleep at night for temporary declines of real estate value.Real Estate Owned (Assets, income, debt):1.

Liquidity: Many financial institutions will ensure that they have cash on hand and available credit lines to support paying off all short term debt.

Invest...then let the added income help payoff current debt.  

It will be the settlement amounts that determine.Now, that being said it is absolutely OK to do exactly what your scenario lays out.