As the model shows in my post on "running the numbers" ("link to Running the numbers"), the mortgage rate you can get will greatly influence what you can afford and the attractiveness of buying.
How do you find out what rate you can get?
When you're considering buying a house, the best proxy for a reasonable rate is Etrade's online mortgage pricing (link to etrade mortgages). To be realistic, add 1/2 to 1/4 point to the rates you see online. This will give you a sense of what to put in the model
How do you find the best rate when you're ready to buy?
The best rate we found was through a mortgage broker. Initially we thought a bank would give us a better rate because there wouldn't be a middle man to take a commission. We were wrong. The bank branch effectively acts as a middle man and recieves a commission from the corporate bank. In fact, Bofa and Wells Fargo were generally much higher than our mortgage broker. Things to look for in a broker:
-Low overhead: If the guy works out of his house, all the better--lower overhead, means he'll accept a smaller commission/ spread and thus you'll get a better rate. Just make sure you know someone has worked with him before
-High volume: Lenders will actually give lower rates to brokers that deliver a lot of volume
What Product Type?
Brokers will have better rates on certain types of loans (e.g. 5 year ARM). The brokers will tend to steer you to these types. If this type of loan isn't what you're interested in, you should check with other brokers for your desired loan--you'll probably find a better rate.
To find out the best product type for you, we've created an analysis on the different loans (link)
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