In Depth Look At My Financial/ Credit Building Plan and Questions

[Nicholas Rado]

Hello everyone, I am looking to get into REI and am taking a hard look at my financial and credit situation to set real goals that will help me purchase my first property. Although I haven't been analyzing my finances or budgeting at all I have been living below my means for a good while and I believe that I am in a relatively good place to start from. I'm going to explain my situation and ask a couple questions that I would love some insight on. I'd also like to mention that I am in Western Massachusetts and looking to get into the Springfield market if anyone is local and wants to reach out. I appreciate any and all feedback. The questions have been made very visible if you don't want to read the details and thought process.

About me, my income, and my savings.  I am 25 years old, unmarried with no kids, and have been working a steady job and have earned a few pay increases the past 2 1/2 years.  I actually just received another raise which bumped me up to around 52k annually (started at 37k).  During that time I have been able to put away around 17k into savings account while contributing 18% (+4% match) to my 401k.  Now that I am looking into investing I plan on reducing my 401k contribution significantly to increase my cash savings that can be used as a down payment. I recently started using Intuit Mint to analyze my fiances, I plan on making a budget to help save even more.  My goal is to have 20k to invest and to be safe I want an extra 5k to have a backup in case of unplanned costs due to inexperience in the buying process, having vacancy the first months, etc...

Question 1: Does it make sense to minimize my 401k contribution to nearly nothing to speed up my savings for REI?

Question 2: Does it make sense to take everything out of my 401k now to use it on REI considering I am likely in a lower tax bracket now than I will be when I retire?

Question 3: Does it make sense to move the money in my 401k account into a Roth IRA for the same reason as Q2?

So lets talk about credit, I've done as much research as I can and think I have a decent handle on the general concepts but have some questions about details.  First of all let me explain my current standing.  Years ago my parents gave me an "emergencies only" credit card to carry and unknowingly put my name on their account.  This card is rarely used, paid in full every month, and has years of credit history.  It is the only thing contributing to my credit but it gives me a credit score of 789 (reported by Intuit after submitting my taxes).  

While it is awesome that I have very good credit, any lender looking into it will see that it is from a single source where I am not every the primary account holder.  So I plan on getting a credit card, there is a whole bunch of available info online about first credit cards so I think I should be good.  I plan on applying for one that is below what is recommended for my credit range to minimize risk of getting rejected and needing multiple inquires into my credit.  I know in general store cards are not so good but I'm considering getting a Lowe's or Home Depot card so I can use points to buy materials for rehabs.  I also plan on doing a small personal loan purely to pay it off and build credit. I'm a bit concerned though because I have heard of people finishing their final payments on loans and it hurting their credit.  My goal is to diversify my credit while still keeping it above 750.

Question 4: Does the benefits of using points for rehab materials on a Lowe's/ Home Depot credit card outweigh the negatives of a store credit card (high interest, etc...)?

Question 5: Will completing a small person loan lower my credit more than it built over the course of the loan?

Almost done, I just have a few concerns about credit inquiries hurting my credit.  First of all I know that my credit is going to drop (at least temporarily) considering I'm starting from such a high point.  I'm hoping to minimize that drop and build it back up again to be stronger that it originally was because it is more diversified.  So if all is done right I will only need 3 credit inquiries: credit card, small personal loan, and pre-approval for property financing.  Now ideally I would get the credit card and loan first, use the card and pay off the loan, and the get pre-approved with my new stronger credit.  I have heard people say that your credit will temporarily drop a fixed amount after an inquiry but a second or third inquiry in the same month won't drop it any more.  If this is true it may make more since to get all 3 inquiries done in the same month.

Question 6: Will getting all credit inquiries done in the same month significantly lower the amount my credit drops?

Thanks for reading everyone, again I appreciate any feedback at all.  I know you are all very busy and it means a lot to me have this kind of access to advice from professionals.