"Spending a few hours to do your homework to get the best loan could save you tens of thousands over the life of the mortgage and likely be the most you ever make per hour."

Good advice. Thanks.

"If that gets you a half a percent discount on the interest rate then with “back of an envelope calculation” you will save $635 the first year(127K*0.5%) but you will also be paying interest on the $3500 you added to the loan of about $158 (3.5K*4.5%) for a net savings of $478 dollars in interest the first year. If you are in the 25% marginal tax bracket though, you will end up paying about $120 in extra income tax because your mortgage deduction will be less for a net savings of about $358 the first year. This isn’t exact but I would pass on the discount points."

I'm not totally clear on your example.
My rate would go down by 1.38%. What is the half a percent you speak of?
If I don't take the $20K, my monthly payment goes down $95. That's $1140 per year.
By the way, I often do not itemize. Occasionally, yes. I should go back and see how often. Since it's yes sometimes and no sometimes, whether to take taxes into account gets muddy. I'd lean toward NOT taking taxes into account.

Thanks,
RB