But if you're not careful, you could be paying far more than you bargained for. And it's not because of interest rates.

What many consumers overlook are the fees that accompany a mortgage.

"Lenders and brokers don't do a very good job in explaining who gets paid what fees and where they go," said Keith Gumbinger, vice president at HSH Associates in Butler, N.J., which publishes mortgage information. "People feel blindsided because the costs they are required to pay and the deposits they are required to make at the closing table are different than they have been led to expect."

But the mortgage financing industry isn't entirely to blame, he said.

"To be fair, borrowers don't take the time they need to understand what's involved in the transaction," Gumbinger said.

Some fees, such as those for administration, loan processing and underwriting, are negotiable ahead of time with a lender.

But it can be confusing: Fee names can differ, and some lenders combine categories.

Critics have named their own category: "junk fees." Those are fees charged to borrowers for a service that has little or no value and is duplicative. "Are you getting the appropriate value for the service rendered?" said Patrick Arnold, a partner and real estate lawyer at Fulbright & Jaworski in Dallas. "Some of the junk fees are used by lenders just to increase their profit margin."

The federal government has proposed rules to streamline the process and make it more consumer-friendly. Even then, it's up to you to understand what you're paying for and to protect your money, even if it's just a small part of a huge mortgage loan.

Federal law says that when you apply for a mortgage, the lender must give you a good faith estimate of settlement costs.

That document lists the estimated fees you will have to pay to get the loan. It also identifies who is expected to provide services and receive fees in connection with your loan, such as credit bureaus, appraisers and closing agents.

A lender must give you the estimate document within three business days after you've applied for the loan. Study it carefully and don't be afraid to challenge any fee you don't understand.

"Some fees are legitimate," said Kathy Mitchell, research manager at Consumers Union in Austin, Texas. "Somebody had to sit down and prepare your documents, but whether you pay them $500 or $100 - that's a big difference. We only say the fees should be reasonable."

Be realistic about what you have to pay.

"Just because there is no application fee doesn't mean there are no fees due at the time of application," Gumbinger said. "Even a good faith estimate does not have all the fees and charges you're required to pay."

Ideally, the estimate should come as close as possible to what will be on the settlement statement, given to you when you close your loan.

The statement, also called a HUD-1, is a loan-closing form required by the U.S. Department of Housing and Urban Development. It provides details of all charges and payments made in connection with your loan, and shows to whom they are distributed.

"If the charges vary from the good faith estimate, there's not much they can do, other than to exercise the right to rescind," said Arnold of Fulbright & Jaworski.

Practically speaking, though, it's very difficult to walk away from the settlement table when you've gotten so far into the transaction and spent so much money already.

So protect yourself by preparing early.

"You want to save as much money as possible in the most cost-effective way," said Craig Jarrell, president of Pulaski Mortgage Co. in Dallas.

First of all, you shouldn't have to pay an origination fee when you're refinancing, because you're refinancing your principal balance, he said. "You want to look for the best interest rate with no origination fee in order to minimize the cost of your refinance," Jarrell said.

The fees can have an insidious effect, because most people roll over their closing costs into their new loan.

"I want to not pay those extra lender fees like a processing fee, underwriting fee," Jarrell said. "It just adds money to your principal balance, which reduces your savings."

You have the right to inspect the settlement statement one business day before closing, so take advantage of that. Check for discrepancies between the good faith estimate and the settlement statement.

"There should be no variance on something you can control," Jarrell said. "If my attorney charges $225, then it should always be $225."

Where changes may occur are areas involving third parties, he said.

"The appraiser may charge extra fees because of the difficulty of the appraisal, but we have to be able to prove that the bill actually exists," Jarrell said. "HUD doesn't allow us to mark those fees up. Lenders have to prove that charge is actually higher."

When you're shopping for a mortgage, research not just interest rates, but also closing costs.

"What you really should be asking your lender is not, 'What's your interest rate?'" Jarrell said. "It's, 'What's your APR (annual percentage rate), because the APR is the interest rate and the closing costs combined."

The federal government wants to make things easier for consumers by overhauling the mortgage settlement process as part of efforts to expand homeownership, particularly among minorities.

HUD officials say it will be the most sweeping reform of the mortgage loan process in almost 30 years.

"It isn't right that far too many Americans sit down at the settlement table, only to discover unexpected fees that can add hundreds, if not thousands, of dollars to the cost of their loan," HUD Secretary Mel Martinez said in an interview. "Too often, people pay more for their closing than they have to."

He wants to relax current rules that inhibit lenders from offering loan applicants a "guaranteed mortgage package" that would have an upfront guaranteed interest rate and a single guaranteed price for closing the transaction.

HUD also wants lenders to improve the good faith estimate, which Martinez said is now "more like a good faith guesstimate."

Lenders should provide consumers a simple, clear and firm estimate document, so they can better understand the charges and use them to comparison-shop before they're so heavily invested in the process that they can't back out, he said.

The change would sharply limit lenders' ability to raise charges at the last minute, Martinez said.

He also wants lenders to clearly disclose mortgage broker fees. A mortgage broker obtains a mortgage loan for the borrower from another lender.

HUD officials say lenders often pay brokers for delivering customers willing to pay higher interest rates. Brokers say they charge the same fees as bankers do for the same work, but are able to shop around for the best rates.

Mortgage bankers say they support the HUD proposal.

"We think it will help streamline the mortgage process and make it more consumer-friendly and provide additional competition, and that will ultimately work to drive down costs for consumers," said Steve O'Connor, vice president of government affairs at the Mortgage Bankers Association of America.

But mortgage brokers say that while they support reforms that will protect consumers, the HUD proposal could hurt their industry.

"Large players will have a competitive advantage," said Ben Vogler, president of the Texas Association of Mortgage Brokers. "Only the large companies would have the ability to package settlement services effectively." Large mortgage banks could force third-party vendors to accept lower fees for their services. That would force those vendors to "undercut the low market rate for their services," Vogler said.

HUD has heard from all sides during the comment period for the proposed rules. Martinez said the changes are on the way.

"These reforms will be enacted sometime in the president's first term," Martinez said. "It will dramatically alter the way the mortgage industry has done business."