How long would it take me to be able to buy a house?

[Cwadda]

I'm 19 in college on pace for graduating a semester early. I really like the idea of buying a house for a rental investment. I will have an expected 40k (generous) debt when I graduate. Hoping to make it less than 10k before I graduate.

Credit history:
Usubsidized Federal loan 6.8% $5400 (interest payments consistently made)
Credit card since January this year

How long will it take me to establish credit enough to buy a house? A small one I'm thinking - under 100k. I'm planning on buying a used car in the next few months. Should I pay in cash or is it better to get a loan for it?

[warfreak2]

With a 6.8% loan, I'd recommend paying the rest of that off before you make any investments.

Mortgage rates are likely to be a lot lower than investment returns, so take out a mortgage. You will probably find that you can get a lower rate if it's for a house you are going to live in, rather than rent out, but if you're going to have to rent somewhere to stay, it might as well be your own property for a few years.

[desrever]

I'd recommend paying cash for the car.

[Cwadda]

How many years of credit building would it take me to get a mortgage?

[FIreDrill]

Pay your debts on time and I would advise not taking a loan out for a car unless you can get 0% interest... Maybe get another credit card so you have another line of credit and pay the balance off every month.  It will be easier to get approved if it is your primary residence so living in it for a couple years and then turning it into a rental would be a good option if you can do it.  Maybe even rent out a room while your living in it to generate some cash flow.  Your credit score will generate what interest rate you get but from what I've seen it doesn't vary a ton as long as you have decent credit and no delinquencies or anything bigger like that.  The main thing that will determine your borrowing power will be your monthly income.  If you have 2 years of history with an employer, and a decent income, you will be fine but they really look at monthly income over the last 2 years and employment history.  I just went through a pre approval and got "approved" for over 250k, I make about 57k per year.  My current credit score is 758 and I'm looking at HUD homes which the more I learn about how the loans work the more I like them.  HUD homes have no PMI with as little as 5% down and you avoid some closing costs like appraisal fees.  However, you should obviously have a good idea of what it appraises for and get a home inspection anyways.

[FIreDrill]

BTW, I am 23 and have building my credit since 18.  I've had several credit cards and a car loan that is now paid off, but like I said, you should prob worry more about income for getting a mortgage...  If you have several credit cards that have been open 2+ years with no late payments you should be fine but I'm no expert.

Edit: Check this out for more info on credit score factors.  http://www.myfico.com/crediteducation/whatsinyourscore.aspx

[Cwadda]

Okay, thanks for the information/advice StudentStacher (and everyone else!) Can you talk a little more about HUD homes? (5 W's or give a link or something?)

When I FIRST opened my credit card my credit score was 666, which is alright. Moving into a house and turning it into a rental later seems like a really good idea.

[FIreDrill]

Here is the link to the HUD site: http://www.homepath.com/index.html

Also, you will be able to put offers in sooner if you are buying it as a primary residence rather than an investment property.  You should be able to find a ton of information on that site, :).  We are planning on purchasing a place that needs some repairs and put about 30-40k into it after purchase.  Many of the HUD homes in my area need some work but they are a great way to build sweat equity.

[brand new stash]

I wouldn't worry about your credit history as much as worry about pulling together the money for the car and the downpayment on the house.  My experience has been that lenders are always willing to lend me much much more than I'm willing to take on in debt.