Prequalifying for a Conventional Loan in L.A.

[Marvin P.]

I am in the process of selling the home that I've been living in for the past five years and luckily will be making a profit in the sale. My wife and I want to purchase another larger house at around the same price that we will be selling the house (± $600k).

We're in the process of trying to prequalify for a loan at this price, but because our FICO score is not as high as I want (we're both at around 685) and because my earnings for 2012 were kind of low (I am self-employed and deduct a lot), the lender that I've used in the past wants 25% down as opposed to 20% AND the interest rate they are offering on a loan of $412k is 4.0%.

I am not happy about this.

Should we shop around for another lender to see if they can offer us at least either a lower down payment requirement or a lower interest rate? I can live either with a higher interest rate or 25% down but requiring both is a double whammy that I am NOT happy about.