For most of us, a home is the largest purchase we’ll ever make. For that reason, the homebuying process can be particularly intimidating. After all, this is a place where we’ll be spending so much of our time, and creating memories with our families. We want to make the right decision.

Most of us don’t buy homes in cash. Therefore, we’ll need to apply for a mortgage – that is, borrow money to purchase the home. Applying for a mortgage can be a complex process. You’ll need to provide the mortgage loan officer with your tax returns, bank statements, and a variety of financial documents. 

You’ll also have to make sure that your credit scores are in order, not only to qualify for a loan, but also, to obtain the best interest rate possible. After all, small differences in your credit score can have a major impact on what you’ll spend on your mortgage over the years.

There are many strategies to save money on a mortgage. As we’ve shared in other posts, you should plan to apply with multiple mortgage lenders, so that you can ensure you’re being offered the best deal possible. Ideally, you should submit all of these mortgage applications within a 14 day period, so that the various mortgage applications count as just a single inquiry.

To apply this hack, it’s important that you understand the differences between various types of mortgage lenders. The best known lenders are traditional banks. These are big national companies like Chase, Wells Fargo, Bank of America and US Bank. 

These banks not only offer mortgages, but also accept deposits from customers (for checking and savings accounts), and perhaps even advice on investments. They may also issue credit cards, auto loans, or business loans. 

If you’re applying for a mortgage with a major national bank, and you don’t have a checking or savings account, you might want to offer to open one. Why do this?

Banks make money by borrowing at a low interest rate (or perhaps no interest rate), and lending the money out at a higher interest rate. Let’s say a bank can offer you a competitive interest rate on a savings account (let’s say they offer a yield of 2%, which is significantly above what you can expect from most savings accounts). 

Now, let’s assume that the bank is able to lend out the money in your savings account at a rate of 4% to a mortgage borrower, or 6% to someone who’s looking for an auto loan, or 18% for a credit card. Do you think the bank would make money through this approach? Of course!

The thing is, for a bank to make money through lending, they need money to lend out. Banks can gain access to this money through the Federal Reserve, or by borrowing from another bank (usually for a short period of time). However, banks also need consumer deposits, and the more of these they have, the more loans they provide.

As with so many things in life, if you help someone else, they might help you in the future. If you give a bank money (which they can lend out to other customers), then they might be willing to offer you a more competitive interest rate on your mortgage. In fact, you should ask the bank whether they’re willing to offer you a lower, upon opening a checking or savings account.  

This certainly isn’t guaranteed. Not every bank is going to be willing to do this. However, some will, and this allows you to save money. All you’re doing is offering to open an account with the bank, and deposit perhaps a few thousand dollars. The money you save on your mortgage might be a lot more.

Keep in mind that this only works with deposit institutions (as mentioned, companies like Bank of America, Chase, and perhaps smaller community banks). It’s not a strategy you can use with non-bank mortgage lenders, i.e. companies like Fairway, Guaranteed Rate, or Freedom Mortgage, which don’t take deposits. However, these banks so offer competitive rates, and so are often worth shopping with.

In short, if you’re shopping for a mortgage with a bank which offers checking and savings accounts, find out whether they’ll reduce your mortgage interest rate, if you open an account with them. It might be the smartest money move you’ve made in a while!