Saving for a Home Down Payment? Here's Where to Put the Cash

by Christy Bieber | Published on Aug. 21, 2021

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You can't put your down-payment money at risk.

A down payment on a home can be very expensive. In fact, you'll likely need to save up tens of thousands of dollars in order to be able to put down the required amount when you are purchasing a property.

It can take time to save up enough cash. And once you have your down-payment funds available, it can still take a while before you eventually find the right home and are ready to use the money to make your purchase.

That means that you need to make a decision about where to keep your down-payment money. And for most people, there's one clear choice for where this cash should go.

Why your down payment should be in a high-yield savings account

Money you plan to use as a down payment on a home should be kept in a separate high-yield savings account that has been specifically earmarked for your future home.

A high-yield savings account is the ideal place for these funds for a few big reasons. First and foremost, a high-yield savings account can give you a chance to earn the most interest without putting your money at risk.

You definitely do not want to invest money that you're saving for a home. Investing your money can be too risky with funds you'll need soon, as you could end up buying stocks or exchange-traded funds (ETF) right before a downturn. That means you'd lose some of your money and may not be able to recoup your losses before it comes time to purchase the property.

If you find an FDIC-insured high-yield savings account and put your down payment there, you aren't really going to face any risk of loss. And these accounts tend to provide a little bit better return on investment than standard savings accounts or other similarly safe investments. When you are saving a lot of money to purchase a home, even a small difference in interest rates can have a pretty big impact on how much your account earns. These extra dollars from a higher rate can help make accomplishing your down-payment goals easier.

Keeping your money in a separate high-yield savings account also reduces the likelihood that you will end up spending the cash on something else. You won't easily mix up the money with cash you have available for other things. This would be a big risk if you kept your down-payment funds mixed in with your regular checking account or your emergency fund.

And, because homeownership is presumably important to you, you'll be less likely to raid the account and spend the down payment if it's in a dedicated account.

By parking your money in a high-yield savings account and leaving it there, you should hopefully be able to amass enough to put down on a home sooner rather than later. Then, all that's left is to apply for the right mortgage, find the perfect home, get your offer accepted by the sellers, and get ready to move in.

These savings accounts are FDIC insured and could earn you up to 15x your bank

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Two top online savings account picks

Rates as of Nov. 30, 2022 Ratings Methodology
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CIT Savings Connect American Express® High Yield Savings
Member, FDIC Member, FDIC
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4.50 stars
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Rating image, 4.00 out of 5 stars.
4.00 stars
Info Icon Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
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On CIT's Secure Website.

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On American Express' Secure Website.

APY: 3.60%

APY: 3.00%

Best For:

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Min. to earn APY: $100

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