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So, where do you go to obtain the best deal on a mortgage? Mary Donaldson, Branch Manager of Sunshine Mortgage Corporation in Smyrna, Georgia, shed some light on this area for me.

Three main types of lenders vie for your loan business—banks, mortgage bankers, and mortgage brokers. In the old days, banks generally made mortgage loans and held the paper, meaning they loaned money from their own portfolio, collected the payments, and profited from the interest earned on the loans. That is no longer the case, as most banks now act as mortgage bankers.

Mortgage bankers close the loan in their own names, but instead of keeping the paper, they sell the loan to a purchaser for a lump sum. The purchaser is normally a government agency, such as Ginnie Mae (GNMA) or Freddie Mac (FMAC), or an individual investor. The buyer pays the mortgage banker a fee to service the loan, meaning they collect the payments and keep all the records, but the buyer actually receives the money.

Mortgage brokers are essentially marketing organizations that match lenders with borrowers. The lenders close the loans in their names and either hold the paper or sell the loans. Mortgage brokers make money from the fees they collect when the loan is closed and may also make a premium if the interest rate on the loan is higher than is generally available in the market.

From which of these three entities can you generally get the best overall deal? Unfortunately, there is no set answer, which is why you should compare offers from each when shopping for a mortgage.

There are several fees involved with a mortgage in addition to the monthly payments. Almost all lenders charge an origination fee, usually about 1 percent of the loan amount, to compensate them for their efforts in processing the loan application and closing the loan. This fee is considered part of the closing costs and, especially for larger loans, may be negotiable.

Other costs involved in the process of closing the loan include the attorney's fees, a title search (to confirm that the seller holds legitimate title to the property), an appraisal of the property's value, and other miscellaneous costs. All the closing costs, including the origination fee, typically average slightly over 3 percent of the loan amount, though this figure may be lower for larger loans. When shopping for a mortgage, consider all the fees the lender charges as well as the interest rate.

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