How to get the lowest mortgage rate on a new purchase?
Purchase loans tend to be more challenging to get the best possible rate, because you have to balance closing the loan and getting the contract. So there isn't as much time to shop around as when you do a refinance.  I disagree with the sentiment to go with your local bank. Nothing wrong with asking at your local bank and using their numbers as a baseline, but chances are they won't be competitive. There are many reputable online mortgage originators that will show accurate fees and rates upfront assuming you provide accurate information.  In the past there were a lot of issue with Good Faith Estimates being pretty much worthless. There were a fair number of horror stories about people showing up to closing and finding out fee or rates had increased dramatically. There was a law passed after the housing debacle that severely limits the shenanigans that lenders can do at closing and so there is less risk when going with a lesser known lender. In fact I would say the only real risk with a lender now days is choosing one that happens to be overloaded and or just has poor customer service in general. Personally I have found the most competitive rates from Zillow's mortgage service and the now defunct Google mortgage. The lenders tend to be smaller, but highly efficient. They are very much dependent on their online reputations. I have heard good things about a number of larger online lenders, but I don't have personal experience so I will leave them off. I personally wouldn't worry much about whether the loan is sold or not. Outside of refinancing I don't think I have ever talked to the bank servicing my mortgage about my mortgage. There just isn't much need to talk to them. Start with the bank where you have your checking and savings account. They can streamline some of the paperwork, because they can see how much you make, and have access to several years worth of bank statement. Legitimate mortgage companies do publish their rates. But there is no guarantee that you will qualify for the best rate without them knowing your credit score, salary, and down payment information.  There is no way to know that you have the best rate because of the time lag involved. You will pick the best one you can work with, but the rates can change every day.  Even when you lock in the rates, other companies can drift lower. Once you have started down the application process you will reach a point where switching companies will cost you time and money. Once you decide to purchase a house, the contract usually only gives you a few weeks to prove that you have financing in place. Therefore you will have to start the process before deciding on the house. Some advance work is needed to give you an idea of the maximum monthly payment you can afford, which will then based on the rate and down payment determine the maximum house you can buy. I have had good luck with my credit union, but there is no guarantee that yours will be competitive. Keep in mind that while rates are very important, some people also value customer service, and also like that the mortgage won't be sold to out of town investors.
Start with the list of mortgage companies approved to work in your area. There are 80 within 10 miles of my house, and more than 100 in my county. Pick ones you know because they are established businesses in your area, region, or even nationally.   A good place to start might be with your current lender. The risk you seem to be worried about is a scam or a trick. In the recent past the scams were ones where the home owner didn't understand teaser rates, and the risk of interest only and pick-your-payment loans. The simpler the bells and whistles, the less likely you are to be embarking on a risky transaction. It can't hurt to ask an organization like the BBB or neighbors, but realize that many people loved their exotic mortgage until the moment it blew up in their face. So for 5 years your neighbor would have raved about their new mortgage until they discovered how underwater they were.  Regarding how smoothy the transaction is accomplished, is hard to predict. There is great variation in the quality of the loan officers, so a great company can have rookie employees. Unless you can get a recommendation for a specific employee it is hard know if your loan officer is going to give great service.   When getting a mortgage for a purchase, the biggest risk is getting a mortgage that results in a payment you can't afford. This is less of a risk with a refinance because you already have a mortgage and monthly payment. But keep in mind some of the monthly savings is due to stretching out the payments for another 30 years. Know what you are trying to do with the refinance because the streamlined ones cant be used for cash out. What kind of financial analysis would make you comfortable about this decision? The HELOC and ARM are the biggest red flags to me in your current situation.  While I don't expect interest rates to skyrocket in the near future, they introduce an interest rate risk that is easy to get rid of.  Getting rid of the HELOC and converting to a fixed mortgage would be my first priority. If you also want to upgrade to a new home at the same time (meaning buy a new home contingent on the sale of your first, paying off the HELOC and mortgage), that's fine, but make sure that you can comfortably afford the payment on a fixed-rate mortgage with at least 20% down. I would not take additional cash out of your equity just to save it.  You're going to pay more in interest that you're going to get in savings.   From there things get trickier.   While many people would keep the first property on a mortgage and rent it out, I am not willing to be a landlord for a part-time job, especially when the interest on the mortgage gouges my return on the rent.  PLus leverage increases the risks as well - all it takes is to go one or two months without rent and you can find yourself unable to make a mortgage payment, wrecking your credit and possibly risking foreclosure. So my options in order of precedence would be: At what point does it make sense to become a landlord? The complicated answer is when the benefits (rent, appreciation) relative to the costs (maintenance, interest, taxes, etc.) and risks (lost rent, bad renters, home value variance) give you a better return that you could find in investments of similar risk.  The simple answer is when you can pay cash for it.  That takes interest and lost rent out of the equation.   Again, some are willing to take those risks and pay 20% down on rental property.  Some are able to make it work.  Some of those go broke or lose their properties.   when calculating the 20% down of a new property, does that need to be liquid funds, or can that be based on the value of the home you are selling You can make the purchase of the new home contingent on the sale of the first if you need to get the equity out of it to make the 20%.  Do NOT refinance the first just to pull out the equity to make a down payment.  It's not worth the fees of a refinance. At the area where I live (Finland), banks typically charge a lot more for additional mortgage credit taken after purchasing the house. So, if you are planning to purchase a house, and pay it with a mortgage, you get a very good rate, but if you pay back the mortgage and then realize you need additional credit, you get a much worse rate. So, if this is applicable to your area as well, I would simply buy stocks after you have paid enough of the mortgage that it is only 50% of the house price or so. This is especially good advice if you are young. Also, if your mortgage is a fixed rate and not an adjustable rate mortgage, you probably have a very low permanent interest rate on it as interest rates are low currently (adjustable rate mortgages will also have a low rate but it will surely go up). Some people say there's a bubble currently in the stock market, but actually the bubble is in the bond market. Stocks are expensive because the other alternatives (bonds) are expensive as well. Paying back your mortgage is equivalent to investing money in bonds. I don't invest in bonds at the current ridiculously low interest rates; I merely invest in stocks and have a small cash reserve that will become even smaller as I discover new investment opportunities. I could pay back a significant percentage (about 50%) of the loans I have by selling my stocks and using my cash reserves. I don't do that; I invest in stocks instead, and am planning to increase my exposure to the stock market at a healthy pace. Also, consider the fact that mortgage is cheap credit. If you need additional credit for consumption due to e.g. becoming suddenly unemployed, you will get it only at very expensive rates, if at all. If you're very near the retirement age (I'm not), this advice may not be applicable to you. Edit: and oh, if your mortgage is fixed rate, and interest rates have come down, the bank will require you to pay the opportunity cost of the unpaid interests. So, you may need to pay more than you owe the bank. Edit2: let's assume the bank offered you a 4% fixed rate for a 10-year loan, which you agreed to. Now let's also assume interest rates of new agreements have come down to 2%. It would be a loss to the bank to pay back the amount of the loan (because the bank cannot get 4% by offering somebody else a new loan, only 2%), unless you paid also 10 years * (4% - 2%) * amount = 20% * amount of lost interest income. At least where I live, in fixed rate loans, one needs to pay back the bank this opportunity cost of unpaid interests. When evaluating a refinance, it all comes down to the payback. Refinancing costs money in closing costs. There are different reasons for refinancing, and they all have different methods for calculating payback.  One reason to finance is to get a lower interest rate. When determining the payback time, you calculate how long it would take to recover your closing costs with the amount you save in interest. For example, if the closing costs are $2,000, your payback time is 2 years if it takes 2 years to save that amount in interest with the new interest rate vs. the old one. The longer you hold the mortgage after you refinance, the more money you save in interest with the new rate. Generally, it doesn't pay to refinance to a lower rate right before you sell, because you aren't holding the mortgage long enough to see the interest savings. You seem to be 3 years away from selling, so you might be able to see some savings here in the next three years.  A second reason people refinance is to lower their monthly payment if they are having trouble paying it. I see you are considering switching from a 15 year to a 30 year; is one of your goals to reduce your monthly payment? By refinancing to a 30 year, you'll be paying a lot of interest in your first few years of payments, extending the payback time of your lower interest rate.  A third reason people refinance is to pull cash out of their equity. This applies to you as well. Since you are planning on using it to remodel the home you are trying to sell, you have to ask yourself if the renovations you are planning will payoff in the increased sale price of your home. Often, renovations don't increase the value of their home as much as they cost. You do renovations because you will enjoy living in the renovated home, and you get some of your money back when you sell. But sometimes you can increase the value of your home by enough to cover the cost of the renovation. Talk to a real estate agent in your area to get their advice on how much the renovations you are talking about will increase the value of your home. I second the suggestions for your local credit union and asking co-workers who might also be in the process of a home purchase. Additionally, you want to educate yourself as much as possible so that you can ask questions about the calculations responsible for the differences. I got different values starting from the various online automatic quotes all the way through to the GFE and it was not obvious to me. You can also sign-up for free workshops for first time home buyers, though most of the material will be a breeze it helps you get worksheets going and lists going for documentation that you need to gather. You might want to start at the HUD site and explore. Especially the Borrower's Rights. The cost booklet was very helpful for me to interpret the GFE, but honestly I didn't appreciate it the first time it was handed to me. Finally, you might meet qualifications to take advantage of FHA programs; the waitlists discourage everyone including the loan brokers, but you want to at least be aware of programs that can help. If you are a subprime borrower, that may not be an unreasonable rate given the risk they are accepting. In any case, it's what you agreed to. As others have said, you could/should have shopped elsewhere for the loan. In fact, you can still shop elsewhere for a loan to refinance that vehicle and thus lower the rate, unless the existing loan has equally obnoxious rules about that. "This is the meat of your potato question. The rephrasing of the question to a lending/real estate executive such as myself, I'd ask, what's the scenario? ""I would say you're looking for an Owner Occupied, Super Jumbo Loan with 20% Down or $360K down on the purchase price, $1.8 mil purchase price, Loan Amount is ~$1.45 mil. Fico is strong (assumption). If this is your scenario, please see image. Yellow is important, more debt increases your backend-DTI which is not good for the deal. As long as it's less than 35%, you're okay.  Can someone do this loan, the short answer is yes. It's smart that you want to keep more cash on hand. Which is understandable, if the price of the property declines, you've lost your shirt and your down payment, then it will take close to 10 years to recover your down. Consider that you are buying at a peak in real estate prices. Prices can't go up more than they are now. Consider that properties peaked in 2006, cooled in 2007, and crashed in 2008. Properties declined for more than 25-45% in 2008; regardless of your reasons of not wanting to come to the full 40% down, it's a bit smarter to hold on to cash for other investments purposes. Just incase a recession does hit.  In the end, if you do the deal-You'll pay more in points, a higher rate compared to the 40% down scenario, the origination fee would increase slightly but you'll keep your money on hand to invest elsewhere, perhaps some units that can help with the cashflow of your home. I've highlighted in yellow what the most important factors that will be affected on a lower down payment. If your debt is low or zero, and income is as high as the scenario, with a fico score of at least 680, you can do the deal all day long. These deals are not uncommon in today's market. Rate will vary. Don't pay attention to the rate, the rate will fluctuate based on many variables, but it's a high figure to give you an idea on total cost and monthly payment for qualification purposes, also to look at the DTI requirement for cash/debt.  See Image below:" tl;dr: I think you can find a much better deal. Doing a strait refi will cost you some amount of money.  However, a 2.5% fee ont top of closing costs seems really high.  You can get a quote from Quicken loans pretty quick and compare their fee.  Also I would check with a local bank, preferably one you already do business with.  The 2.5% is probably their commission for originating the loan.  If you are in the Southeast I have had great luck with Regions bank.  They are large enough, but also small enough.  Please know that I have no affiliation with either company. BTW the rate also seems high.  Doing a quick search of Bank Rate, it seems you can get 3.25% with zero fee as of this writing.  The worse deal they show is 3.46 with a .75% fee, much better than you were quoted. If you can afford it I would also encourage you to think outside the box.  A client of mine was able to obtain a Home Equity Loan (not line of credit) to replace their mortgage.  They went for a 7 year pay off, with the loan in first position, at a rate about .75 below the then current 15 year rate.  The key was there was zero closing costs.  It saved them quite a bit of money. Also look at a 10 year fixed.  It might not be much more than you are paying now.