The heart of this question is, “Am I ready to be an investor?” Let’s look at some of the considerations.
First let’s talk about “Owner Occupied” financing. This means that you live in the house you buy. This type of financing is much cheaper to come by than “Investment” financing. On any investment property, you’ll pay higher interest and have to bring at least 20% down payment because investment properties are higher risk to the lender. So, the cheapest way to acquire a second house is to occupy the new house.
This matters because it means you’re going to rent the house you’re living in now. Talk to your friendly Realtor® to obtain a market value of your home, your equity position in the home, a repair checklist, and a rental analysis for the area. Note that your lender will be able to count a percentage (usually 75%) of your monthly rental income as income to qualify for the next property.
At this point, you’ll need to talk to your lender and explain what you’re planning to do. They’ll count the rental income as qualifying income, they’ll plan for you to occupy the new home, and they’ll give you a ceiling price for your new home.
This is more complex than simply living in the home you bought. However, it’s also far more financially rewarding. This type of transaction paves your path to financial freedom through real estate.